Quick answer
A co-signer on a mortgage is usually a non-occupant co-borrower: they sign the note and are fully liable, and their income and debts both count. In our example, a buyer earning $54,000 a year has a debt-to-income ratio of 62% on a $300,000 home; adding a parent earning $108,000 with their own mortgage brings it to 38%. Fannie Mae allows up to 95% loan-to-value with a non-occupant borrower through its automated underwriting. The usual way to take the co-signer off later is a refinance in your name alone.
Key facts
95%
Fannie Mae max LTV with a non-occupant borrower (DU)
Fannie Mae Selling Guide B2-2-04 · Sep 2, 2020
90%
Fannie Mae max LTV with a non-occupant borrower (manual)
Fannie Mae Selling Guide B2-2-04 · Sep 2, 2020
12months
On-time history that lets a co-signer drop the debt from their DTI
Fannie Mae Selling Guide B3-6-05 · Aug 5, 2026
Co-signer, co-borrower or co-owner: three different roles
People say “co-signer” for anyone who helps on a mortgage, but lenders and title companies separate three roles. The difference is whether the person signs the promissory note (and owes the debt), appears on the title (and owns the home), and lives there.
| Co-signer or guarantor | Non-occupant co-borrower | Co-owner on title only | |
|---|---|---|---|
| Signs the note and owes the debt | Yes, jointly with you | Yes, jointly with you | No |
| Owns part of the home | No | May or may not | Yes |
| Lives in the home | No | No | Either |
| Income and debts count for the loan | Yes | Yes | No |
| Typical example | A parent backing a first purchase | A parent who also wants a share of the home | A partner with savings but no income to add |
Fannie Mae’s Selling Guide treats the first two alike for underwriting: both sign the note and share liability, and its automated system weighs each person’s income, assets, debts and credit whether or not they will live in the home. Only a person on the note adds income. A co-owner who is only on the title owns a share but doesn’t help you qualify. The debt-to-income guide explains the ratio lenders apply to all of this.
What Fannie Mae and FHA allow
Conventional loans sold to Fannie Mae allow a non-occupant borrower on a principal residence, with tighter limits than a loan where everyone lives in the home:
| Underwriting | Maximum loan-to-value | Debt-to-income test |
|---|---|---|
| Desktop Underwriter (automated) | 95% | All borrowers’ income and debts together, up to the 50% DU ceiling |
| Manual underwriting, using the non-occupant’s income | 90% | The occupant’s own debt-to-income can’t exceed 43%, on the occupant’s income alone |
So with a co-signer, the smallest conventional down payment is 5% through automated underwriting rather than the 3% some first-time buyers can use, and 10% if the file is manually underwritten. A Community Seconds loan can take the combined ratio higher when the program allows it.
FHA loans also accept non-occupant co-borrowers, with loan-to-value limits of their own set in HUD Handbook 4000.1 (section II.A.2.b, Loan-to-Value Limits). Those limits can differ from the standard 3.5% minimum down payment, so ask the lender to confirm the maximum loan for your situation before you make an offer.
Whichever program you use, the co-signer has to qualify too: lenders pull their credit, verify their income and count their debts exactly as they do yours.
How a co-signer’s income — and debts — change the math
Say you earn $54,000 a year ($4,500 a month), pay $350 a month on a car and want a $300,000 home with 5% down. Your parent earns $108,000 and already pays $1,900 on their own mortgage and $450 on a car.
DTI on a $300,000 home, 5% down, at 7.24%
| You alone | You + your parent | |
|---|---|---|
| New housing payment (with taxes, insurance and PMI) | $2,430 | $2,430 |
| Other monthly debts | $350 | $2,700 |
| Gross monthly income | $4,500 | $13,500 |
| Debt-to-income ratio | 62% | 38% |
With your parent on the note, the ratio is inside Freddie Mac’s 45% guideline. Under manual underwriting, though, your own ratio of 62% fails Fannie Mae’s 43% test for the occupant, so this file would need Desktop Underwriter approval.
The co-signer’s debts matter as much as their income. At a 45% total debt-to-income ratio:
| Who is on the loan | Monthly income | Monthly debts | Housing budget | Home price |
|---|---|---|---|---|
| Occupant alone | $4,500 | $350 | $1,675 | $207,000 |
| Occupant + co-borrower with no debts | $13,500 | $350 | $5,725 | $707,000 |
| Occupant + co-borrower with the debts above | $13,500 | $2,700 | $3,375 | $417,000 |
Your parent’s existing mortgage and car loan cost about $290,000 of buying power. A co-signer with a paid-off home adds far more than one with a large mortgage of their own.
What the co-signer is on the hook for
Co-signing a mortgage is not a reference. The FTC’s guidance on co-signing is plain: if the main borrower stops paying, the co-signer must repay the loan, and the lender can pursue the co-signer directly. For a mortgage that means:
- The whole debt. Everyone who signs the note is liable for the full balance, not a share of it.
- Their credit. The mortgage appears on their credit report, and your late payments become their late payments.
- Their own borrowing. The payment counts in their debt-to-income ratio when they apply for credit. Fannie Mae lets a lender leave it out only when someone else who is obligated on the mortgage has made the payments, with 12 months of on-time history documented.
- No automatic ownership. A co-signer who isn’t on the title owes the debt without owning any of the home.
Getting the co-signer off the loan
A lender won’t simply delete a name from a note, because each borrower was part of the approval. There are three ways out.
Refinance in your own name. You need to qualify alone at the time. In the example, your income would have to reach about $74,127 a year for the same payment to fit a 45% ratio. How long that takes depends on your raises:
| Your pay rises | Years to qualify alone | Your salary then |
|---|---|---|
| 3% a year | 11 years | $74,749 |
| 5% a year | 7 years | $75,983 |
| 7% a year | 5 years | $75,738 |
By year five you would owe about $268,952 — 90% of the original price — so a refinance then would likely still need PMI unless the home has gained value. Budget $8,069–$16,137 for costs at Freddie Mac’s 3%–6% range, and check whether it pays with is refinancing worth it?
Assumption with a release of liability. Some loans can be assumed — FHA and VA loans with the lender’s approval — and a written release frees the departing borrower. Most conventional fixed-rate loans have a due-on-sale clause and can’t be assumed. See assumable mortgage.
Sell the home. Paying off the loan ends everyone’s liability.
Alternatives to a co-signer
A co-signer is one way to close the gap; others don’t tie a second person to the debt:
- A cash gift. A relative’s gift toward the down payment lowers the loan and the payment without adding them to the note. Lenders ask for a gift letter, and gifts up to $19,000 per recipient in 2026 need no gift tax return.
- Down-payment assistance. State programs can add help without a co-signer; see down-payment assistance programs.
- Lower debts. Paying off a car loan with a few payments left can lift your budget by the whole payment.
- A lower price. On your own income, a 45% ratio supports about $207,000 in this example.
Before anyone signs
Decide the role
Co-signer only, co-borrower with a share of the title, or a gift instead.
Check both credit reports
The co-signer’s score, income and debts are part of the approval, so fix errors before you apply.
Ask how the lender will underwrite
Automated or manual decides whether 95% or 90% loan-to-value applies.
Write a side agreement
Payments, sale, death or divorce, and the exit plan.
Set a refinance target
The income or date at which you’ll try to qualify alone.
Frequently asked questions
Is a co-signer the same as a co-borrower on a mortgage?
For underwriting, nearly. Both sign the note and are fully liable, and both add their income and debts. The difference is ownership: a co-signer usually isn’t on the title, while a co-borrower may be.
How much down payment do I need with a co-signer?
On a Fannie Mae conventional loan with a borrower who won’t live in the home, the maximum loan-to-value is 95% through automated underwriting — at least 5% down — and 90% if the loan is manually underwritten.
Do the co-signer’s debts count against me?
Yes. Lenders add every borrower’s debts and income together. In our example a parent’s mortgage and car loan cut the price the pair could afford by about $290,000 compared with a co-signer who owed nothing.
Can a co-signer be removed from a mortgage?
Not by request. The usual routes are refinancing in your own name, an assumption with a release of liability where the loan allows it (FHA and VA loans can be assumable), or selling the home.
Will co-signing affect my parent’s ability to borrow?
Yes. The mortgage shows on their credit report and counts in their debt-to-income ratio. Under Fannie Mae rules a lender can leave it out once you have made the payments yourself for 12 months with no late payments, documented by bank statements or canceled checks.
Is a gift better than a co-signer?
Often, if the helper can afford it. A gift lowers your loan without making them liable for it. You will need a gift letter, and gifts above $19,000 to one person in a year require the giver to file a gift tax return.
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- US Census Bureau, American Community Survey 2024 1-year — Effective property tax rate (median taxes ÷ median home value) (2024 ACS 1-year)
- Freddie Mac Research — Average homeowners insurance premium per $1,000 of home value (2023 data)
- Freddie Mac My Home — Typical PMI cost, low end; Typical PMI cost, high end (Oct 28, 2026)
- Fannie Mae Selling Guide B3-6-02 — Fannie Mae maximum DTI, Desktop Underwriter loans (Apr 2, 2025)
- Freddie Mac My Home — Freddie Mac guidance: total debt payments below this share of gross income (Jan 22, 2026)
- Fannie Mae Selling Guide B2-2-04 — Fannie Mae manually underwritten loans using a non-occupant borrower’s income: highest DTI for the occupying borrower(s), on their income alone; Fannie Mae DU loans with a co-signer, guarantor or co-borrower who won’t live in the home: maximum LTV/CLTV/HCLTV; Fannie Mae manually underwritten loans using a non-occupant borrower’s income: maximum LTV/CLTV/HCLTV (Sep 2, 2020)
- Freddie Mac My Home — Typical refinance closing costs, low end (share of loan principal); Typical refinance closing costs, high end (share of loan principal) (Oct 28, 2026)
- IRS: What's new — Estate and gift tax — Annual gift tax exclusion per recipient (2026) (Tax year 2026)
- CFPB — Minimum down payment on some conventional loans; Minimum FHA down payment (Oct 28, 2026)
- Fannie Mae Selling Guide B3-6-05 — Fannie Mae: a mortgage you are obligated on but someone else pays can be left out of your DTI with this many months of on-time payments documented (Aug 5, 2026)
- FTC: Cosigning a loan FAQs
- HUD Handbook 4000.1 (FHA Single Family Housing Policy Handbook)
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.