New 2016 FHA Guidelines On Co Borrowers
Updated 2016 FHA Guidelines On Co Borrowers
HUD has implemented and launched the new HUD FHA 4000.1 Handbook on September 14, 2015 where many changes has been made to FHA Lending Guidelines. FHA Loans are hands down the most popular residential mortgage loan program in this country where it has much more lenient mortgage lending guidelines than Fannie Mae and Freddie Mac’s conventional loan programs. Home Buyers with less than perfect credit, low credit scores, outstanding collection accounts, prior bankruptcy, prior foreclosure, prior deed in lieu of foreclosure, prior short sale, judgments, tax liens, charge off accounts, and higher debt to income ratios often can get a FHA mortgage loan approval where they cannot qualify for conventional loan programs. 2016 FHA Guidelines On Co Borrowers make home ownership possible for home buyers who are self employed or those with little or no income or those home buyers who work for cash and do not have documented income for mortgage lenders to be able to use. Home Buyers with low credit scores can often qualify for FHA Loans as long as they have documented income, however, those with perfect credit scores and no income cannot qualify for FHA Loans or any other mortgage loan programs. Income is key when qualifying for a home loan.
2016 FHA Guidelines On Co Borrowers
FHA requirements on FHA Guidelines On Co Borrowers state that to be eligible to be a non-occupant co-borrower on a FHA Loan, the non-occupant co-borrower needs to be related to the main borrower by blood, law, or marriage. What this means is that non-occupant co-borrowers can be parents, brothers, sisters, grand parents, sons, daughters, daughter-in law, son-in law, father-in law, mother-in law, grandparents in laws. However, there are some mortgage lenders like myself that really do not enforce the relationship and just take the borrower’s word for it. There are some lenders where they want to see documentation as to the relationship about non-occupant co-borrowers. Non-occupant co-borrowers will go on the mortgage note but do not need to go on title unless they need to.
2016 FHA Guidelines On Co Borrowers: Credit Scores
When a main borrower add a non-occupant co-borrower or just a co-borrower on the mortgage loan, the co-borrower’s credit scores will be reviewed also. The credit scores used in qualifying for the mortgage loan when it involves co-borrowers is that mortgage lenders use the lower of the two mortgage loan borrower’s middle credit scores. For example, lets take this case scenario in explaining what qualifying credit scores mortgage lender will use when qualifying for a mortgage loan:
Main Borrower: John Smith: Credit Scores are 780 FICO TransUnion, 680 FICO Experian, 580 FICO Equifax. The middle credit score for John Smith is 680 FICO Experian.
Co-Borrower: Jesse Smith: Credit Scores are 650 FICO TransUnion, 581 FICO Experian, 500 FICO Equifax. The middle credit score for Jesse Smith is 581 FICO Experian.
On the above case scenario, the co-borrower’s credit score of 581 FICO will be used for qualifying purposes because Jesse Smith, the co-borrower, has the lower middle score between the two borrowers.
2016 FHA Guidelines On Co Borrowers: Multiple Co Borrowers
2016 FHA Guidelines On Co Borrowers allow more than one co borrower to be added on the FHA Loan for income qualification purposes. A main borrower can have multiple co-borrowers to qualify for income in the event if one co-borrower does not have sufficient income or have higher debt to income ratios. Co borrowers on FHA Loans can be folks who are on fixed income like social security, disability income, or retirement income. Non taxable income borrowers can have their non taxable income grossed up by 15%.