**Title: How FHA Non-Occupant Co-Borrowers Can Help You Secure a Mortgage**
**Introduction**
A Federal Housing Administration (FHA) loan offers borrowers the chance to obtain a mortgage with less stringent financial requirements. This option is particularly beneficial for young people, students, and families. However, for those struggling to qualify, an FHA non-occupant co-borrower could be the key to achieving homeownership.
**What Is an FHA Loan?**
FHA loans are government-backed loans originated by private lenders through the Federal Housing Administration (FHA). These loans often come with lower interest rates and credit score requirements but have limitations on their use. For instance, FHA loans cannot be used to finance investment or vacation properties.
**Does the FHA Allow Non-Occupying Co-Borrowers?**
Yes, the FHA allows non-occupying co-borrowers. This means you can have a co-borrower on an FHA loan who doesnt make the home their primary residence. However, at least one borrower must live in the house as their primary residence. Non-occupying co-borrowers can help borrowers qualify for an FHA loan by providing additional income and improving the debt-to-income ratio (DTI), making the qualification process easier.
**How Does Co-Borrowing Work?**
Co-borrowing is a unique option for home buyers. The FHA allows another borrower, who will not live on-site, to co-sign on an FHA home loan. When applying for a mortgage with a non-occupying co-borrower, the lender considers the income, liabilities, assets, and credit scores of both borrowers. This often improves the primary borrowers approval chances, especially if the non-occupying co-borrower has a higher income.
**FHA Guidelines for Non-Occupying Co-Borrowers**
FHA loans are attractive due to their lower down payment options. Depending on your qualifications, you may only need to put down 3.5% on a mortgage. However, if you want to add a non-occupying co-borrower and still pay only 3.5% down, the co-borrower must be considered a family member by the FHA. Family members include:
– Parents (including stepparents and foster parents)
– Spouses or domestic partners
– Children (including stepchildren, foster children, and adopted children)
– Siblings (including stepsiblings)
– Grandparents (including step-grandparents and foster grandparents)
– Aunts and Uncles
– In-Laws (including son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law)
If the non-occupying co-borrower isnt a family member, a larger down payment is required. Generally, the loan-to-value (LTV) is limited to 75% if the co-borrower is not a family member or if a family member is selling the property to another family member. In these cases, a 25% down payment is required. The LTV rule of 75% also applies if the property is a two- to four-unit residence.
Regardless of family status, a non-occupying co-borrower must either be a U.S. citizen or have a principal residence in the U.S. The maximum number of co-borrowers on an FHA mortgage is capped at two. Additionally, a co-borrower must meet certain eligibility requirements, such as having a qualifying credit score, DTI, and income.
**FHA Loan Co-Signer vs. Non-Occupant Co-Borrower: Understanding the Difference**
While a co-signer may seem similar to a co-borrower, there is a crucial difference. A co-signer on an FHA loan doesnt hold any ownership interest in the property. Although FHA co-signers are obligated on the mortgage note, they have no legal rights to the property. Conversely, a co-borrower is required to take the title to the property at settlement and is also obligated on the mortgage note. At closing, the co-borrower must sign all security instruments, making the new home part of their liabilities.
**Pros and Cons of FHA Non-Occupant Co-Borrowers**
**Pros:**
– Borrowers can potentially obtain a higher loan amount.
– Homeowners can build equity in the property with a reliable backup on the mortgage.
– The co-buyer can be removed if the primary owner refinances.
**Cons:**
– The co-buyer must submit a separate application and go through the full mortgage approval process.
– The consequences of default impact all parties, including financial penalties and lowered credit scores.
– Theres a potential lack of independence for homeowners from co-buyers.
– The interest rate is based on the lowest median credit score of the various borrowers.
– Non-occupant co-borrowers dont get tax deductions for the mortgage unless they are making mortgage payments.
**The Bottom Line: A Non-Occupant Co-Borrower Increases Loan Success**
A non-occupant co-borrower could be a solution for those pursuing homeownership through an FHA loan. With the help of a higher income and better credit score on your loan application, more affordable homeownership could be within reach.
If you are ready to move forward, take a minute to start your mortgage application for an FHA loan with O1ne Mortgage Inc. today. Visit [O1ne Mortgage Inc.](https://o1nemortgage.com) to request a mortgage quote, apply for a loan, or speak with a representative. You can also call us at 888-372-8820.
**Keywords:** FHA loan, non-occupant co-borrower, mortgage loan, homeownership, FHA guidelines, mortgage application, O1ne Mortgage Inc.
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