Scenario 1- Your parents want to help you buy a house, can't put a ton down for your downpayment, and you need to qualify for more than what you are approved for.
Scenario 2- You are self employed and can't prove your income. Let's say you haven't been self employed for 2 years or maybe you wrote off wayyyy too much and not your adjusted gross income is too low.
Scenario 3- You have a full time job, but you recently started a side hustle and it's doing well. Your parents know that, but the banks don't so you can't qualify for the loan.
So how can your parents help you qualify for a mortgage? One great program that many people know about is FHA. This loan is a 3.5% down payment loan and is great for first time home buyers. But did you know that you can have a non-occupant co-borrower on this loan? Well what does that mean? It means that your parents or other relative can co-sign for you and include their income in the loan in order to qualify. This is great if you just need to bump your income a bit or like I said before are self-employed with income that might be a little harder to prove.
According to FHA loan rules found in HUD 4155.1, a borrower must occupy the home purchased with a single-family FHA mortgage as his/her personal residence as a condition of loan approval.
At least one person obligated on the FHA loan must live in the home as the primary residence, according to HUD 4155.1.
In cases where not all the borrowers will live in the home full-time, the loan is classified differently. As a result, there are different rules that may affect the mortgage.
According to HUD 4155.1, Chapter 2 Section B, A non-occupying borrower transaction involves two or more borrowers where one or more of the borrower(s) will not occupy the property as his/her primary residence. When there are two or more borrowers, but one or more will not occupy the property as his/her principal residence, the maximum mortgage is limited to 75% loan-to-value (LTV).
Borrowers should take note of some exceptions to that 75% limit which are based on family-type relationships.
Borrowers are eligible for maximum FHA loan financing for non-occupying borrower situations for FHA loan applicants who are related by blood, marriage, or law. Chapter Two describes these relationships, which include (but may not be limited to) the following:
...and, according to Chapter Two of HUD 4155.1, unrelated individuals who can document evidence of a longstanding, substantial family-type relationship not arising out of the loan transaction.
FHA loan rules also say that in cases where a parent is selling the property to a child, the parent cannot be the co-borrower with the child, unless the LTV is 75% or less.
While restrictions do apply for non-occupying co-borrowers, this type of FHA loan is possible. It's best to discuss your specific needs with a loan officer to see what may be applicable in your specific circumstances.
Watch the video below as I describe these circumstances further, and if you are ready to Apply for a mortgage click here and fill out the long application.