A co-borrower is the second name on the mortgage note, the person who shares the debt with you and normally shares ownership on the title. Spouses and partners buying together are the most common pair. The lender treats the two of you as one applicant: both incomes count, both sets of debts count, and both credit reports are pulled.
HUD's FHA handbook draws a line between three roles. A co-borrower signs the note and takes title. A co-signer signs the note but has no ownership in the home. A non-occupant co-borrower is a co-borrower who won't live there, such as a parent helping a first-time buyer. Fannie Mae uses similar terms for Conventional loans.
A two-income example
Maria earns $4,200 a month gross with no monthly debts. Her partner Devon earns $3,600 and pays $450 a month on a car. On an FHA loan with an automated approval, the house payment can reach 46.9% of gross income and all debts together can reach 56.9%.
| Maria alone | Maria and Devon | |
|---|---|---|
| Gross monthly income | $4,200 | $7,800 |
| Housing cap at 46.9% | $1,969.80 | $3,658.20 |
| Total-debt cap at 56.9% | $2,389.80 | $4,438.20 |
| Minus monthly debts | $0 | $450 |
| Room left for housing under the total cap | $2,389.80 | $3,988.20 |
| Highest house payment (the lower cap) | $1,969.80 | $3,658.20 |
Adding Devon raises the payment they can carry by $1,688.40 a month, even after his car payment comes in.
How the credit scores combine
Each borrower's score is the middle of three bureau scores. FHA then uses the lowest of those middle scores for the loan. Say Maria's middle score is 680 and Devon's is 590. Together they still clear FHA's 580 line for 3.5% down. Conventional pricing would use 590, which sits below the 620 most lenders start at, so as a pair they would go FHA. Maria alone at 680 could compare FHA against Conventional with 3% down.
When a partner stays off the loan
Leaving someone off can make sense when their score is low or their debts outweigh their pay. The person on the loan qualifies on their own income, and the other partner can still live in the home. In Florida, the state constitution protects a married couple's homestead, so lenders generally ask a non-borrowing spouse to sign the mortgage (the lien on the house) even though that spouse doesn't sign the note or owe the debt.
Try both versions on the affordability calculator or the DTI calculator. Then call AAA Capital Funding at 888-601-8344, and we'll price the loan with both names and with one so you can see which approval goes further.