Can You Have a Co-Signer on an FHA Loan?

You can have a co-signer on an FHA loan. The qualifications for an FHA loan are often more lenient compared to a conventional loan. But if you’re struggling to qualify due to a lower credit score or higher debt-to-income (DTI) ratio, a co-signer can help strengthen your mortgage application. When using a co-signer on an FHA loan, their financial profile, including income, assets, and credit history, is considered alongside yours. Understanding co-signer requirements for FHA loans and the potential benefits can help you determine if a co-signer is the right option for you.

Check if you pre-qualify for an FHA loan with us at Zillow Home Loans*.

Who can be a co-signer on an FHA loan?

According to the Federal Housing Association (FHA) guidelines, co-signers on FHA loans must be someone you know who is not involved with the transaction. If your co-signer is not a family member, you may be asked to prove you've had a long relationship with them. Here are some of the co-signer requirements for FHA loans:

• Be a U.S. citizen with a Social Security number or have legal residency status.
• Have a credit history and financial profile that meets the lender’s requirements (typically a credit score of 580 and above, and debt-to-income ratio of 43% or lower). 
• Show at least two years of stable income and employment history.
• Have a relationship with the borrower, such as a family member, spouse, or close friend. 

Is it easier to qualify for an FHA loan with a co-signer?

Yes, in many cases, having a co-signer can make it easier to qualify. However, lenders still evaluate both the borrower’s and the co-signer’s financial backgrounds to ensure the loan can be repaid. Make sure you find a co-signer with a strong credit history, low debts and higher income. Most lenders choose the lowest credit score between you and the co-signer to factor into their approval. 

A co-signer can provide the following benefits when applying for an FHA loan:

• Allow you to qualify with little to no credit history. 
• Increase your borrowing amount, since your lender will consider your combined income. 
• Allow you to potentially qualify for a lower interest rate.
• Lower your debt-to-income ratio to meet FHA loan minimum requirements.

Differences between a co-borrower and co-signer on FHA loans

Both a co-borrower and a co-signer can improve your chances of qualifying for an FHA loan. A co-borrower is legally responsible for repaying the mortgage with you as they have ownership rights and are listed on the title of the property. A co-signer doesn't have any legal rights to the home, meaning they do not need to make mortgage payments unless you (as the borrower) fail to do so. 

The FHA also allows what's known as non-occupying co-borrowers. This means you can have a co-borrower on the loan who does not live in the home. In this case, at least one borrower has to make the home their primary residence. The non-occupying co-borrower, unlike a co-signer, will still have a legal responsibility to repay the mortgage and have ownership rights, which includes being listed on the title of the property.

FHA co-signer and co-borrower requirements

Before choosing to add a co-signer, co-borrower or both, it's important to understand FHA requirements and lender-specific rules. Here are some key factors to keep in mind:

• A lender can reject your co-signer or co-borrower if they don’t meet eligibility requirements, like credit score, DTI, and income.
• FHA allows a co-borrower to be on the loan even if they do not live in the home.
• If the loan-to-value (LTV) ratio exceeds 75%, the property must be a one-unit home.
• Non-occupying co-borrowers typically need to be related by blood, marriage, or law.
• Your non-occupying co-borrower can be a non-family member if you put down 25%.

Is it worth it to have a co-signer on an FHA loan?

While a co-signer can give your application the extra boost needed for approval, it’s important to consider the long-term impact. If you can afford the mortgage on your own, improving your credit or reducing your debt may be a better option than involving a co-signer. Weigh the pros and cons to help you decide if a co-signer is right for you.

One of the biggest advantages of having a co-signer on an FHA loan is that it can increase your chances of loan approval, especially if you have a lower credit score or limited income. A co-signer can also help you secure better loan terms, such as a lower interest rate, since the lender considers their financial profile alongside yours. Additionally, a co-signer can make homeownership possible for first-time buyers who may not yet meet all of the lender’s criteria on their own — while still enabling them to qualify for first-time home buyer programs.

However, there are also risks to consider. A co-signer is legally responsible for the loan if the primary borrower fails to make payments. In a worst-case scenario, this could strain relationships or impact your own credit history if they, too, stop making payments. For the borrower, relying on a co-signer might mean they are not fully financially ready for homeownership. Additionally, some lenders have stricter requirements when a co-signer is involved, which could add complexity to the approval process.

Final thoughts

If you're struggling to qualify for an FHA loan on your own, having a co-signer might be your solution. However, it’s essential to understand the responsibilities of co-signers before moving forward. Consult with a mortgage lender to determine the best approach for your situation. Our loan officers can answer all your questions, contact us at Zillow Home Loans* to learn more about your financing options.

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