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FHA Cash-Out Guide

FHA Cash-Out With a Non-Occupant Co-Borrower

FHA cash-out rules prohibit using a non-occupant co-borrower’s income to qualify. Your application must qualify without that person’s income.

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Willing help is different from income the lender can count.

No. FHA cash-out rules prohibit using a non-occupant co-borrower’s income to qualify. Your application must qualify without that person’s income (HUD Mortgagee Letter 2023-17, published 10/16/2023, section II.A.8.d.v(A)).

A non-occupant co-borrower signs onto the loan but does not live in the property. Having someone willing to help is different from having income the lender can count.

Bottom line: Illustrative example: you want cash out, and your sister offers to join the mortgage while continuing to live elsewhere. Her salary cannot fill the qualifying-income gap for FHA cash-out.

A different label or relationship does not change the income restriction.

Non-occupant income

HUD Mortgagee Letter 2023-17 prohibits using a non-occupant co-borrower’s income to qualify for FHA cash-out.

Qualify on your own

The application must qualify without the non-occupant’s income.

Occupancy is its own review

If the other borrower lives in the home, that requires a different review; occupancy alone does not establish eligibility.

Questions to settle before you apply.

Start with whose income you expect to use and whether the application works without anyone who will not live in the home.

Whose income are you counting?

List every borrower, say who lives in the home, and identify which income you expect to rely on. If part of the qualifying income belongs to someone who will not occupy the property, ask whether the file still works without it.

Which income can count and how it is documented

Ask the banker which of your income sources can count for FHA cash-out and which documents establish each one, before you plan around a cash-out amount.

Availability depends on the review

Availability depends on the property state, program and completed review.

Do not get tripped up by half-true FHA advice.

"My parent is the co-borrower, so it is different"

No. A family relationship does not create an exception to this income restriction.

"They already signed my current mortgage"

Do not assume their income carries into the cash-out qualification. The restriction still applies.

"Calling them a co-signer solves it"

No. A different label does not make a non-occupant’s income eligible.

Where this guidance comes from.

This page is based on HUD Mortgagee Letter 2023-17, published 10/16/2023, section II.A.8.d.v(A), and HUD Handbook 4000.1, revised 11/26/2025, cash-out borrower eligibility.

The article is informational, not a loan approval, legal advice, credit counseling, APR disclosure, or commitment to lend. Final eligibility depends on the complete file and underwriting.

Ask Texana to review your FHA cash-out question.

Start an inquiry and explain whose income you expect to use. Availability depends on the property state, program and completed review.

Questions to Bring to Your Review

What borrowers say about Texana Bank

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