FHA Guidelines On Non-Occupant Co-Borrowers

This ARTICLE On FHA Guidelines On Non-Occupant Co-Borrowers Was UPDATED On July 8, 2017

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 borrower by law, blood, and/or marriage.
  • A non occupant co-borrowers need to meet all FHA Guidelines like the borrower.

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.

  • FHA Guidelines on debt on debt to income ratio allow 46.9% front end and 56.9% back end DTI.
  • However, many qualified home buyers exceed this ratio because they cannot document their income so non-occupant co-borrowers is 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

Another group of individuals who often have high debt to income ratios are 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 less 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.

FHA Loan 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

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 FHA Guidelines and qualify with the lenders credit, and income guidelines.

Home buyers who are looking for a FHA Lender with no overlays and have more questions on this topic, please call us at 262-716-8151 or email us at gcho@gustancho.com.

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

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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