Can You Have a Cosigner on an FHA Loan?

The Basics

FHA insures the mortgage debt on a home and reimburses the lender if the homeowner defaults. FHA loans are generally geared toward borrowers who occupy the home as their primary residence.

The Department of Housing and Urban Development distinguishes between a co-signer and co-borrower. A co-signer shares equal responsibility for the mortgage with the primary borrower but has no legal claim to the property. A co-borrower, however, is responsible for the loan repayment and is listed on the title as co-owner.

FHA considers the co-signer's income, assets, liabilities and credit history, according to FHA Outreach. The co-signer also must complete and sign the lender's loan application.

Before a co-signer uses his good credit to help someone else, he must understand his obligations under the loan and what will happen if the primary borrower fails to repay the debt, says Lawyers.com.

FHA requires a co-signer to sign all documents associated with the loan except for the security instrument--the deed of trust or mortgage--as they hold no ownership interest in the property.

FHA prohibits certain individuals from co-signing on FHA-insured loans. A co-signer may not hold a financial interest in the sale of the property, therefore the seller, builder or real estate agent may not co-sign on a transaction in which they are involved. FHA may make an exception for sellers and co-signers who are related by blood, marriage or law.

Those with delinquent federal debt or those who are banned from participating in HUD's programs may not co-sign an FHA loan.

Co-signers may or may not occupy the property as their primary residence. If the co-signer is a non-occupant borrower, she must have a primary residence within the United States, with the exception of members of the military serving overseas and citizens who live abroad.

To circumvent investors from participating in its insurance programs, FHA limits the use of a non-occupying co-signer to transactions involving one-unit properties when the maximum mortgage loan-to-value exceeds 75 percent.