The Quick Read: It depends on the loan program. Fannie Mae’s conventional guide permits a non-occupant co-borrower or guarantor on a cash-out refinance, while Freddie Mac, FHA and VA each draw the line differently. Whichever program applies, the added person signs the note, is liable for the whole debt, and is underwritten together with the owner as one combined file.
Key Takeaways
- The program decides the answer before anyone’s credit is pulled.
- An added co-borrower is a full borrower. Their income, debts and credit all enter the file.
- A non-occupant can strengthen a file or sink it, depending on their debts.
- Leverage on a cash-out is set by occupancy and property type, and an added person does not raise it.
- Qualification is always subject to lender guidelines and full file review. Nothing here is a commitment to lend.
Key Terms Defined
Co-borrower: a person who signs the note and shares full legal responsibility for the loan, usually with an ownership interest.
Co-signer: a person who signs the note to back the loan. Some programs define this person as someone with no title and no ownership interest.
Guarantor: a person who promises to repay if the borrower does not. Underwriters often treat this role like a non-occupant borrower.
Non-occupant borrower: a borrower on a primary-residence loan who does not live in the home.
Combined DTI: the total monthly debts of all borrowers divided by their total monthly income.
Cash-out refinance: a new mortgage that pays off the old one and hands the borrower part of the equity in cash.
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.
What Is Being Underwritten When Someone Is Added?
A cash-out refinance is a brand-new loan, so every person on it qualifies together. Adding a co-borrower does not patch the old file. It creates a new one that includes their credit, income, debts and liability.
Across the wholesale programs Lendmire places files with, the first question is never “who can help?” It is “which program is this loan going to?” Lendmire’s cash-out refinance programs page lays out the conventional lanes. The loan is then judged on four things: the people, the property, the equity and the documents.
For the people, the lender reviews credit, income, debts and assets for each borrower. For the property, the appraisal sets value and occupancy sets the leverage ceiling. For the equity, the cash-out limit applies. For the documents, every borrower supplies a full set.
Why Does the Program Decide the Answer First?
Each agency writes its own rule on non-occupants, and the rules do not match. A borrower team that works in one channel can fail in another.
| Program | Non-occupant on a cash-out? | Their income counted? |
|---|---|---|
| Fannie Mae conventional | Permitted | Yes, same standards as occupant income |
| Freddie Mac conventional | Not on a primary-residence cash-out | Not applicable |
| FHA | May be on the loan | Not on a cash-out |
| VA cash-out | Depends on the structure | Depends on entitlement and joint-loan rules |
Fannie Mae’s Selling Guide says guarantors, co-signers and non-occupant borrowers are permitted on purchase, limited cash-out and cash-out refinance transactions. Freddie Mac went the other way. Its Guide section 5103.1 limits non-occupying borrowers on a primary residence to purchase or no-cash-out transactions, a change announced in Bulletin 2023-24.
One caution on FHA. The no-income rule for non-occupants on a cash-out comes from the FHA handbook, and HUD’s archived reference guide uses older wording to the same effect. Because the handbook is revised over time, confirm the current wording with your loan officer before planning around it.
How Does the Underwriting Run, Step by Step?
The sequence is predictable. Here is how a file moves.
Step 1: Program triage. The broker matches the borrowers and property to a program. If a non-occupant is needed and the file can only go to an investor that bars them, the structure changes before paperwork starts.
Step 2: Basic cash-out eligibility. Every normal cash-out test still applies. The first mortgage being paid off must be at least 12 months old, measured note date to note date. At least one borrower must have been on title for 6 months, with exceptions for delayed financing, inheritance and legal awards. The added co-borrower does not need to be on title for this test. The existing owner satisfies it.
Step 3: The added person signs as a borrower. They sign the note and carry joint liability for the full debt. Whether they also go on title or sign the security instrument depends on the program and on whether they are a co-borrower or a co-signer. HUD’s FAQ on co-borrowers and co-signers draws that line for FHA: co-borrowers take title and sign the security instruments, while co-signers sign the note only.
Step 4: Combined credit and ratios. Credit is pulled on everyone. Fannie Mae’s non-occupant fact sheet says the non-occupant’s income and liabilities go into the combined DTI. On the wholesale conventional programs, a 620 decision score is the starting point, the automated finding governs most files, and the total ratio ceiling is 50%. Manually underwritten loans use a 36% or 45% ratio depending on the reserve and score factors in the Eligibility Matrix. All of this is subject to lender guidelines.
Step 5: The leverage check. Occupancy and property type set the cap. A conventional cash-out reaches 80% LTV on a one-unit principal residence and 75% on two- to four-unit properties, second homes and investment property. Fannie Mae’s eligibility matrix notes that using non-occupant income calls for lower LTV limits. So an added person does not raise leverage. At best, they help the file clear the ratios at the standard limit. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Step 6: Appraisal. The appraised value sets the maximum loan. Streamline products can skip an appraisal, but a cash-out generally cannot.
Step 7: Documents. Each borrower supplies income, asset and credit documents, and every borrower signs the note.
Does Adding Someone Help or Hurt?
It helps when the added person brings strong income and light debt. It hurts when they bring heavy obligations or weak credit. The file is judged on the combined picture, not the best individual in it.
| Added person looks like | Likely effect on the file |
|---|---|
| High income, low debts, solid credit | Combined DTI improves, the file may clear |
| High income, heavy debts | DTI may barely move or worsen |
| Strong income, thin credit history | Can offset on manual files, within limits |
| Recent major derogatory credit | Income cannot offset it |
On manually underwritten loans, Fannie Mae allows non-occupant income to offset weaknesses such as limited income, reserves or credit history. It cannot offset significant or recent major derogatory credit. Agency waiting periods after credit events apply to every borrower: four years from a chapter 7 discharge, seven from a foreclosure, and four from a short sale or deed-in-lieu, shorter with documented extenuating circumstances.
One thing adding a person does not change is the cost of a cash-out. Cash-out pricing still applies, so a helper does not remove it.
Co-Borrower Versus Guarantor: What Changes in the File?
The legal weight is the same. The paperwork differs.
| Factor | Co-borrower | Guarantor or co-signer |
|---|---|---|
| Signs the note | Yes | Yes, in the structures that allow it |
| On title | Often | Often not |
| Income in DTI | Yes | Generally yes where permitted |
| Liable for full debt | Yes | Yes |
The CFPB’s mortgage key terms page is plain on liability. A co-signer or co-borrower takes full responsibility to repay with you and must cover missed payments, even the full loan amount. It also notes that some programs define a co-signer as someone not on title with no ownership interest. Since the terms vary by program, a loan officer should confirm which label applies to your file.
Where Does the General Rule Break?
Several edge cases change the answer.
Freddie Mac versus Fannie Mae. The same team can pass at one and fail at the other. A broker who shops multiple wholesale lenders can steer the file to the channel that permits the structure.
FHA. A non-occupant may appear on the loan, but their income generally cannot be used on a cash-out, so they add liability without helping the ratios. Family-member exceptions exist for purchases, not cash-outs.
Buying out a co-owner. This is a limited cash-out transaction at both agencies. Freddie Mac’s section 4301.6 requires at least 12 months of joint ownership, proof of joint primary-residence occupancy, and a written agreement signed by all parties. The retaining borrower may not receive proceeds. The incidental cash-back limits apply: for Fannie Mae, the lesser of 2% of the new loan amount or $2,000, and for Freddie Mac, the greater of 1% or $2,000.
No credit score. Fannie Mae allows non-occupant co-borrowers on manually underwritten loans with nontraditional credit, if its non-occupant rules are also met.
HomeReady. Non-occupant borrowers are permitted, with an income limit of 80% of area median income.
VA. The IRRRL is VA-to-VA only, and cannot pay out equity, so it cannot fund a buyout. A veteran with a non-veteran spouse is not treated as a joint loan. A non-veteran, non-spouse co-borrower may split the guaranty and could require cash down. A VA cash-out uses a VA appraisal and a Certificate of Eligibility.
Interested parties. A non-occupying borrower generally cannot be the seller, builder or agent in the transaction.
Second homes and rentals. Occupancy sets leverage, and the non-occupant rules for these properties differ from a primary residence. That is a separate conversation from this one.
Texas homesteads. A cash-out on a Texas homestead is capped at 80% of the home’s value by the state constitution.
What Do the Three Common Scenarios Look Like?
A parent helping a grown child’s ratios. The child owns and lives in the home. A parent with strong income and low debt is added as a non-occupant. Under Fannie Mae, that can work, with the parent’s debts counted and lower leverage possible. Under Freddie Mac, it does not work on a primary-residence cash-out. The channel matters more than the family.
A new spouse joining the loan. A spouse who lives in the home is an occupant borrower, not a non-occupant. This avoids most of the special rules. Their income, debts and credit simply join the file. On a VA loan, a non-veteran spouse can co-borrow without creating a joint-loan split.
An ex-partner coming off. A divorce decree alone does not remove someone from the note. A refinance, payoff or formal release does. Buying out a co-owner under a written agreement is a limited cash-out transaction at both Fannie Mae and Freddie Mac, so the borrower who keeps the home cannot take cash proceeds beyond the incidental amount those programs allow. Read the agreement terms with the loan officer.
What Are the Alternatives?
Three options often beat adding someone.
1. Apply alone. If the owner’s own income clears the ratios at the leverage needed, nothing is added and nothing is risked.
2. Add an occupant. A spouse or relative who actually lives in the home avoids the non-occupant rules.
3. Take less cash. A smaller cash-out, or a rate-and-term refinance at up to 95% LTV on a one-unit principal residence, can fit a thinner file. A rate-and-term loan pays off the existing mortgage and costs, with only incidental cash back. Mortgage insurance is required above 80% LTV on the agency path, and it cancels at 80% on request and terminates at 78%. The one exception is the wholesale no-MI cash-out lane, which reaches 89.99% LTV at a 680 score and a 50% ratio on a thirty-year fixed primary residence with a conforming balance. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Those are options, not recommendations. The right answer depends on the borrower’s income, the leverage needed and the relationship involved.
What Does the Added Person Take On?
Full liability. If payments are missed, the lender can pursue them for the whole balance. A cash-out also raises the balance for both people. The loan appears on their credit and counts as their own debt when they later apply for credit. Cash-out pricing applies, and the added person does not remove it.
Before agreeing, a helper should know how and when they can come off. Release generally means refinancing, paying off or getting a formal release. It is not automatic.
What Should Each Person Prepare?
Expect each borrower to supply:
- Recent pay documents and tax records for income
- Statements for assets and reserves
- A credit authorization
- A list of debts, including obligations outside the mortgage
- Government ID and a signature on the note
For a buyout, add the written agreement signed by all parties and proof of joint occupancy and ownership.
Frequently Asked Questions
Can a non-occupant co-borrower go on any cash-out refinance?
No. Fannie Mae permits it on a cash-out, but Freddie Mac does not on a primary-residence cash-out, and FHA bars using the non-occupant’s income. The investor channel is chosen first, and a broker shopping multiple wholesale lenders can match the structure to a program that allows it.
Does the added person need to be on title?
Not necessarily. For the title-seasoning test, the existing owner satisfies the 6-month requirement. Whether the added person goes on title depends on the program and on whether they are labeled a co-borrower or a co-signer.
Will adding a co-borrower let me borrow more?
Usually not. Leverage on a cash-out is set by occupancy and property type, 80% on a one-unit principal residence, and non-occupant income can call for lower limits. The added person helps the ratios, not the ceiling.
What happens to the co-borrower’s credit?
The loan counts as their debt. They are fully liable for the balance, and it can affect their ability to borrow later. Missed payments can damage both borrowers’ credit.
Can someone come off the loan later?
Only through a refinance, payoff or formal release. A divorce decree or private agreement does not change the note by itself, so the lender must approve the change.
Next Step
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. Program details change, so confirm current guidelines at the sources below.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Fannie Mae Selling Guide B2-2-04
3. Freddie Mac Bulletin 2023-24
4. HUD Archives HOC Reference Guide
5. HUD FHA Answers: Co-Borrowers and Co-signers
6. Fannie Mae Non-Occupant Borrower Fact Sheet
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Cash-Out Refinance Requirements When You Are Relocating · How Lenders Underwrite a Cash-Out Refinance for Renovations and the Appraisal Requirement · How Lenders Read a Recent Listing on a Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.