FHA Loans and FHA Mortgages

FHA loans has always allowed a buyer to get help from a relative to help them qualify for their purchase of a new home, without that person living in that new property. This would be known as a non-occupant co-borrower or non-occupying co-borrower.  On the conventional side of things, it can be done, but there are more restrictions and guidelines when going conventionally.

Keep in mind, the co-signor or non-occupant co-borrower is not their to help you qualify based on your credit. The sole purpose is to help you qualify you with your income. Many think that if you have bad credit, that the co-signor is also able to help you qualify if their credit is excellent. That scenario is not allowed. You still need to qualify on your own credit worthiness.  FHA Credit – Understanding what works

So, what is all the excitement?  FHA announced back in May of 2008 that we are now able to allow non-occupant co-borrowers on FHA mortgages that are refinances. This is huge, to allow a FHA non-occupying co-borrower to help with someone in need on their refinance now. I can’t tell you how many consumers that I couldn’t help in the last year, when trying to refinance out of their high end adjustable rate mortgage that another loan officer stuck them into last minute. Even if I was going to save the client $150 a month, but they didn’t qualify because their income didn’t meet the qualifications. This could have put them in a worse situation, possibly foreclosure and such, if they couldn’t lower their mortgage payments.

In regards to this FHA refinance transaction, it can be used for both cash-out or rate-term. However, Cash-out mortgages will be limited to an 85% LTV on non-occupant co-borrower loans.  

On FHA loans for non-occupant co borrowers, 100% of the co-signer’s income can be used no matter how much money the primary borrower makes. This also can help the borrower to achieve the maximum fha loan limits depending on what county that they are buying in. Each county has different mortgage amounts. And by having this co-signer, this can help those borrowers that might have some income that they can’t prove, knowing that they can still make the higher mortgage payment.  One thing to keep in mind though is that the co-signer’s debt is also used in this equation. If their debt is extremely high, this co-signer might not help the situation.

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