FHA Guidelines On Non-Occupant Co-Borrowers And Borrowers

This ARTICLE On FHA Guidelines On Non-Occupant Co-Borrowers Was UPDATED On July 24th, 2019

FHA Guidelines On Non-Occupant Co-Borrowers

FHA Guidelines On Non-Occupant Co-Borrowers allow family members to be on a home buyers FHA Loan for income qualification. There can be more than one non-occupant co-borrowers.

  •  FHA allows a non-occupant cosigner is allowed with FHA loans
  • Non-Occupant Co-Borrowers need to be related to the borrower by law, blood, and/or marriage.
  • A non-occupant co-borrowers need to meet all FHA Guidelines like the borrower
  • The main borrower can have non-occupant co-borrowers who are not related by law, marriage, blood but if that is the case, 25% down payment is required

In this article, we will discuss FHA Guidelines On Non-Occupant Co-Borrowers And Borrowers on FHA Loans.

High Debt To Income Ratios

High Debt To Income Ratios

There are many cases where an individual would not qualify for a home loan due to high debt to income ratios.

  • HUD Guidelines on debt on debt to income ratio allow 46.9% front end and 56.9% back end DTI
  • However, many qualified homebuyers exceed this ratio because they cannot document their income so non-occupant co-borrowers are needed
  • Folks in the restaurant industry are often paid in cash and do not declare their cash income so the lender cannot use the undeclared income

Self-Employed Borrowers

Self-Employed Borrowers

Another group of individuals who often have high debt to income ratios is self-employed individuals and business owners.

  • Self-employed individuals and business owners often use the tax loopholes in writing expenses off and often get away with declaring less income in order to pay fewer taxes
  • This is great because it saves the person from paying more taxes but it is a major problem when it comes to applying for a mortgage loan

HUD Guidelines After Bankruptcy And Foreclosure

HUD Guidelines After Bankruptcy And Foreclosure

Other cases where the debt to income ratio problem comes in is when a married person has a bankruptcy or foreclosure but the other person does not.

  • The married person without a bankruptcy or foreclosure can qualify for a mortgage loan
  • But the married person with the bankruptcy or foreclosure cannot be on the loan and therefore their income cannot be used in qualifying for a mortgage loan
  • Non-Occupant Co-Borrowers can make situations like the above possible in qualifying for FHA Loans

Child Support Payments And Other Debts

Child Support Payments

Other typical scenarios include mortgage loan borrowers who have child support payments.

  • Two, three, four kids can take up a chunk of a person’s gross monthly income and although not every dollar is used on the kids, the lender considers every dollar awarded as child support as a monthly liability. 
  • Folks with high monthly child support payments often run into high debt to income ratio problems and the only solution is a cosigner for them to qualify for a mortgage loan.
  • Non-Occupant Co-Borrowers can own another home and do not have to live with the borrower.
  • However, they do have to meet all HUD Guidelines and qualify with the lenders’ credit, and income guidelines.

Homebuyers who are looking for an FHA Lender with no overlays and have more questions on this topic, please call us at 262-716-8151 or text us for faster response. Or email us at [email protected]

Gustan Cho, NMLS ID 873293

Related> Can being a cosigner on a loan hurt me from qualifying for home loan?

Related> FHA Loans: Having 2 FHA Loans at the same time

Related> Co-signing and Debt to Income Ratios

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