How Does FHA Define Family Member: Non-Occupant Co-Borrowers
Adding Non-Occupant Co-Borrowers And How Does FHA Define Family Member
How Does FHA Define Family Member? FHA has FHA Guidelines on How Does FHA Define Family Member. The definition of family member will come into play when it comes to adding non-occupant co-borrowers. FHA allows non-occupant co-borrowers to be added on a FHA Loan if the main FHA mortgage loan borrower cannot qualify on their own due to not enough income, no income, or negative income. FHA does not have any restrictions on how many non-occupant co-borrowers can be added to the main borrower’s FHA Loan however, FHA does require that non-occupant co-borrowers be family members of the main FHA mortgage loan borrower.
Non-Occupant Co-Borrowers are needed if the main borrower has no income, little income, or negative income where they cannot qualify for a mortgage loan by themselves due to higher debt to income ratio and them exceeding the maximum FHA DTI Guidelines. FHA will allow up to 56.9% DTI for FHA mortgage loan borrowers with at least 620 FICO Credit Scores or higher. FHA maximum debt to income ratio limits for FHA mortgage loan borrowers with credit scores under 620 FICO is 43% debt to income ratio. Any FHA mortgage loan borrowers that exceed these debt to income ratios would need a family member and/or family members to be non-occupant co-borrowers in order for them to qualify for the FHA Loan.
Borrowers And Non-Occupant Co-Borrowers With FHA Loans
Home Buyers with no income, little income, or negative income can qualify for a FHA home purchase mortgage loan with non-occupant co-borrowers. However, non-occupant co-borrowers also need to qualify with credit and other FHA Guidelines besides just income. With regards to credit scores, the lower of the two or more borrowers middle credit scores will be used for credit qualification purposes. For example, lets take the following case scenario where the main borrower has two non-occupant co-borrowers:
- Borrower A: 520 FICO TransUnion, 620 FICO Experian, 700 FICO Equifax: Middle Credit Score 620 FICO
- Co-Borrower B: 600 FICO TransUnion, 700 FICO Experian, 800 FICO Equifax: Middle Credit Score 700 FICO
- Co-Borrower C: 500 FICO TransUnion, 600 FICO Experian, 750 FICO Equifax: Middle Credit Score 600 FICO.
Co-Borrower C has the lowest middle credit of 600 FICO so the credit scores of Co-Borrower C will be used as the qualifying credit scores for this mortgage loan application.
How Does FHA Define Family Member: Who Can Qualify As Non-Occupant Co-Borrowers
FHA has updated the FHA Guidelines on September 14, 2015 and the new revised FHA Guidelines is called the HUD 4000.1 Handbook. FHA defines family member as someone who is related to the borrower by blood, law, or marriage. Here is the people that are classified as family members and these folks will all qualify as non-occupant co-borrowers:
• Children, parent, or grandparent
1. A child is defined as a son, stepson, daughter, or stepdaughter
2. A parent or grandparent includes a step-parent/grandparent or foster parent/grandparent
• Spouse Or Domestic Partner of the main borrower
• Legally adopted son or daughter, including a child who is placed with the borrower by an authorized agency for legal adoption
• Foster Child of the borrower
• Brother, Stepbrother of the borrower
• Sister, Stepsister of the borrower
• Uncle of the borrower
• Aunt of the borrower
• A Son-in-law of the borrower, Daughter-in-law of the borrower, or Father-in-law of the borrower, Mother-in-law of the borrower, brother-in-law of the borrower, sister-in-law of the borrower.