The Quick Read: It depends on which program the file runs under, because a co-signer’s income counts on some cash-out loans and not on others. Fannie Mae conventional permits a non-occupant on a cash-out refinance. Freddie Mac does not on a primary residence, and FHA will not count a non-occupant’s income on cash-out. For most borrowers who need a co-signer’s income to qualify, conventional under Fannie Mae rules is the realistic path, subject to lender guidelines and full file review.
Lendmire is a mortgage broker, not a lender. Across the wholesale programs we place consumer files with, the deciding factor is the agency whose rules govern the loan. The co-signer question is not about who is nicest to sign. It is about which agency’s rules govern the loan. Lendmire’s cash-out refinance programs page covers the program basics. This article covers the co-signer layer.
Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.18% as of November 5, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the agency cap on a one-unit principal residence, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
Key Terms Defined
Co-signer: A person who signs the loan and is legally on the hook to repay it if the borrower cannot. Agency guides usually call this person a non-occupant borrower.
Non-occupant borrower: The agency term for a co-signer. This person signs the note, adds income and credit to the file, and does not live in the home.
Occupying borrower: The borrower who lives in the home as a primary residence.
LTV (loan-to-value): The new loan balance divided by the appraised value. It sets how much cash is possible.
Limited cash-out refinance: A refinance that pays off the existing loan and costs, with only incidental cash back. It is also called a rate-and-term refinance.
DU (Desktop Underwriter): Fannie Mae’s automated underwriting system. It reviews every borrower’s income, assets, debts and credit.
What Does “Co-Signer” Mean on a Mortgage?
On a mortgage, the word means a non-occupant borrower. The Fannie Mae Selling Guide section B2-2-04 groups guarantors, co-signers and non-occupant borrowers together. A parent who agrees to be on the loan and does not live in the home is the classic case.
Two things follow. First, the co-signer is fully liable. The federal consumer-finance regulator describes a co-signer as legally obligated to repay if the primary borrower can’t. This is not a backup role that only activates on default. Second, being on the note does not automatically mean being on title. Whether the co-signer is on title is a separate decision that depends on the file and the closing documents.
Which Cash-Out Programs Accept a Co-Signer?
Only some do, and the split is sharper than most borrowers expect. The table below shows how each program treats a non-occupant on a primary-residence cash-out.
| Program | Non-occupant allowed? | Does their income count? |
|---|---|---|
| Fannie Mae conventional | Yes | Yes, with lower LTV caps |
| Freddie Mac conventional | No, primary residence | Not applicable |
| FHA cash-out | Can sign, per HUD text | No |
| VA cash-out | Not settled in VA guidance | Lender-specific; ask a loan officer |
Fannie Mae. Section B2-2-04 permits these borrowers on purchase, limited cash-out and cash-out refinance transactions. DU considers the income, assets, liabilities and credit of all borrowers, regardless of occupancy. That is what lets a co-signer’s income close an income gap.
Freddie Mac. The Freddie Mac Guide section 5103.1 says a mortgage on a primary residence with a non-occupying borrower must be a purchase or a no-cash-out refinance. That rules out cash-out for the occupant-plus-co-signer structure. There is a narrow carve-out: a home occupied by the borrower’s parent, or by a person with a disability whose parent or guardian is the borrower, counts as a primary residence for the borrower.
FHA. FHA has long kept non-occupants out of the qualifying math on cash-out. HUD Mortgagee Letter 2009-08 is an older letter, useful as background only. It said a non-occupant co-borrower or co-signer may not be added to meet FHA’s credit underwriting guidelines on a cash-out refinance. FHA’s current position is that income from a non-occupant co-borrower may not be used to qualify for an FHA cash-out refinance, and that cash-out is allowed only on owner-occupied principal residences. Confirm the current wording on hud.gov before relying on it.
VA. VA’s guidance on refinances defines the refinance types: the VA streamline refinance, which gives no cash out, and Type I and Type II cash-out loans. It does not settle how a non-veteran co-signer is treated. A loan officer has to review that against the specific file and the lender’s own rules.
So is there a “best” program? For a borrower who needs someone else’s income, the answer narrows to Fannie Mae conventional. For a borrower who qualifies alone, the best program depends on credit, equity and what the cash is for.
How the Loan Is Underwritten, Step by Step
Here is how a co-signer file moves, from first call to closing table.
1. Define who is on the loan. The occupant lives in the home. The co-signer signs the note and does not live there. Title is decided separately.
2. Pick the program by what the co-signer must do. If the co-signer’s income is needed, FHA will not count it and Freddie Mac won’t take the file on a primary-residence cash-out. That leaves Fannie Mae conventional.
3. Run underwriting. Under DU, all borrowers’ income, assets, debts and credit are reviewed together. In manual underwriting, the occupant’s own ratio carries more weight. The Fannie Mae non-occupant fact sheet puts the occupant’s manual-underwriting DTI limit at 43%, based on their own income. The co-signer’s existing debts count against the combined picture.
4. Order the appraisal. Appraised value sets LTV, and LTV decides how much cash is possible.
5. Collect documents from both people. Each provides income, asset and credit documentation. The co-signer cannot be an interested party such as the seller, builder or agent.
6. Close. The new loan pays off the old one and disburses the difference. The co-signer signs the note and disclosures. Whether they sign the security instrument depends on title. Loan Estimate and Closing Disclosure rules apply to this consumer loan.
Where the Co-Signer Cap Meets the Cash-Out Cap
This is the number that trips up borrowers. Fannie Mae’s Eligibility Matrix lowers the LTV limits when a non-occupant’s income is used: under 90% for manually underwritten loans and under 95% for DU loans. A reader sees 95% and assumes a co-signer unlocks 95% cash-out. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
That assumption is wrong. The cash-out limit is lower, and it binds. On a one-unit primary residence, conventional cash-out tops out at 80% LTV. On a two- to four-unit primary residence, it is 75%. The co-signer cap only matters on purchases and limited cash-out loans, where the borrower can go higher. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Seasoning applies too. Across the conventional programs we place files with, the first mortgage being paid off must be at least 12 months old, note date to note date. A borrower must have been on title for six months, with exceptions for delayed financing, inheritance and legal awards. A file that skips this check gets sent back.
Worked Scenarios
Income gap. An adult child owns a home and wants cash for repairs. Their income alone leaves the ratios too high. A parent with strong income and low debt joins as a non-occupant. Under Fannie Mae with DU, the combined ratio can improve. The loan stays under the 80% cash-out LTV cap. It is a plausible fit, subject to lender review.
Freddie Mac file. The same adult child brings the same parent, but the file is steered toward a Freddie Mac loan. The primary-residence cash-out will not take a non-occupant. The structure has to change or the program does.
FHA file. An existing FHA borrower wants cash out and needs a relative’s income to qualify. The relative can’t help qualify. The borrower either qualifies alone, moves to conventional, or skips the cash.
Credit gap. A borrower with a thin score brings a co-signer with a strong one. Conventional wholesale programs start at a 620 decision score, and the automated finding governs most files. A co-signer can help the combined picture. It will not push the cash-out past its 80% cap.
Co-owner buyout. Two siblings own a home and one wants out. Freddie Mac has a special-purpose cash-out in Guide section 4301.6 for buying out a co-owner’s equity. That removes an owner. It does not add a co-signer.
What a Co-Signer Changes on the Loan
A co-signer adds weight and risk to the file. Four things move.
Leverage. The non-occupant caps sit above the cash-out cap, so the cash-out cap rules. The co-signer helps qualification, not borrowing room.
Underwriting path. Some files that would pass DU with a co-signer become harder in manual underwriting. Manually underwritten loans carry 36% or 45% ratio limits tied to the Eligibility Matrix reserve and score factors, whether or not a co-signer is on the loan.
Documentation. Two people means two sets of pay stubs, asset statements and credit pulls. Gaps on either side stall the file.
Mortgage insurance. Above 80% LTV, conventional loans require it, except in the wholesale no-MI cash-out lane for eligible primary-residence files. On a cash-out capped at 80%, that mostly doesn’t apply. It matters more on limited cash-out files that run higher. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
What the Co-Signer Is Signing Up For
Plenty of families treat this as a favor. It is a financial commitment. The CFPB notes the co-signer is legally obligated to repay. Late or missed payments can hurt both credit records, a point the CFPB’s co-signer guidance makes about co-signing generally.
A cash-out refinance raises the balance, and a larger balance raises the co-signer’s shared exposure. Their own debt-to-income picture shifts too, which can limit what they borrow for themselves later.
A short protection checklist for the co-signer:
- Ask whether the borrower could qualify alone, and on what terms.
- Put the arrangement in writing, including who pays and what happens on a missed payment.
- Decide title up front, not at the closing table.
- Check your own borrowing plans before signing.
- Agree on an exit plan.
Who Makes a Good Co-Signer?
Someone with steady documented income, manageable debt, and a clean credit file. They have to be willing to share their financial records with a lender. They cannot be an interested party to the transaction. Many families choose a parent. That works when the parent’s own debts are low enough to help the combined ratio instead of hurting it.
If a Co-Signer Isn’t Allowed
Not every program will accept a co-signer on a cash-out loan, so it helps to know the alternatives:
- Borrow alone. The CFPB points out a creditor generally cannot require another person’s signature if the applicant qualifies alone for the amount and terms requested.
- Add an occupying spouse or partner. A borrower who lives in the home is a different case from a non-occupant, and occupying borrowers usually count on any program.
- Switch programs. If FHA closes the door, conventional may open it.
- Take less cash. A limited cash-out refinance lets a borrower take only the lesser of 2% of the new loan amount or $2,000, per Fannie Mae Selling Guide B2-1.3-03. Because the cash-out cap of 80% does not apply there, a file with a non-occupant can run at higher leverage than on a full cash-out.
- Wait and build. Seasoning, payment history and debt paydown each improve the file.
Getting the Co-Signer Off Later
There is usually one mechanism: refinance again. The borrower then has to qualify alone, on income, credit and equity at that point. Build that test into the plan from day one. A borrower who can only carry the loan with the co-signer’s income is not close to an exit. A co-signer who expects to leave in a year or two needs to know now.
Why a Broker Fits This Problem
The best program for your situation depends on income, credit, equity, occupancy and what the cash is for. The co-signer question adds one more variable. Different wholesale lenders layer their own overlays on top of agency rules, so two lenders can treat the same co-signer file differently. A broker that shops several wholesale lenders can match the file to the lender whose guidelines fit. Lendmire arranges consumer loans in 16 states and does not lend.
Frequently Asked Questions
Can my parent co-sign my cash-out refinance?
Sometimes. Under Fannie Mae conventional rules a non-occupant, such as a parent, can be on a cash-out refinance, and DU reviews both people’s income and credit. Freddie Mac won’t take that structure on a primary residence, and FHA will not count the parent’s income. Whether it works depends on the program, the LTV after appraisal and the combined ratios.
Does a co-signer let me borrow more?
No. The co-signer helps you qualify, but the cash-out limit stays the same. The higher non-occupant caps apply to purchases and limited cash-out, not full cash-out.
Is the co-signer on the title?
Not necessarily. A non-occupant borrower may or may not be on title. Title is decided separately from who signs the note, so settle it before closing and have it reviewed by a qualified professional.
Can I remove the co-signer later?
Usually only by refinancing. At that point you have to qualify alone, so plan for it from the start.
What if I already have an FHA or VA loan and want cash out?
Neither streamline delivers cash. The FHA Streamline and VA IRRRL refinance an existing government loan without cash out. A cash-out is a different loan, and a co-signer’s income will not count on an FHA cash-out. Subject to lender guidelines and full file review, a conventional cash-out may be worth comparing.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Reach the team at 828-256-2183 or through the quote request page. Nothing here is a commitment to lend.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B2-2-04: Guarantors, Co-Signers or Non-Occupant Borrowers
2. CFPB
3. Freddie Mac Guide Section 5103.1
4. HUD Mortgagee Letter 2009-08
5. Fannie Mae Non-Occupant Borrower Fact Sheet
6. Fannie Mae Eligibility Matrix
7. Freddie Mac Guide Section 4301.6
9. Fannie Mae Selling Guide B2-1.3-03: Cash-Out Refinance Transactions
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Qualify and Apply for a Cash-Out Refinance With a Small Loan Balance · How to Qualify and Apply for a Cash-Out Refinance Rolling Closing Costs Into the Loan · How to Plan and Use a Cash-Out Refinance Instead of a Personal Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.