The Home Buyer's Korner

Information presented should be used for educational purposes only.

January 22nd, 2016

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NASHVILLE, TENNESSEE

Home Buyer’s Korner

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Mortgage Lender

General Contractor G+

Cosigners & FHA Loans

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Often parents are good examples of your typical co-signers for younger adult children wanting to purchase a home with an FHA mortgage. Many find it a financially smart move to purchase a condominium for their children rather than paying rent at a university dorm. Regardless of the reason, it’s acceptable practice to be a co-signer with an FHA mortgage. Some lenders require the occupying co-borrower to earn at least 50% the total monthly payment, but more often than not lenders will rely totally on the income and down payment from the co-signer to purchase a home, while only requiring the occupying borrower to have a qualify credit history and FICO score.

HUD manual 4155.1 explains what’s allowable and what’s not for an FHA loan when it comes to applications with “non-occupying co-signers”. Simply put, a non-occupying co-signer 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).” However, for borrowers who are related FHA offers an exception to this rule and allows for maximum financing. In short, if a co-signor relationship needs to exist between you and your parent, cousin, sister, etc., all either of you need have is a 3.5% down payment. Furthermore, FHA offers other relationships who might qualify as a co-signor, which are but not limited to:

Individuals related by marriage, or law and unrelated individuals who can document evidence of a longstanding, substantial family-type relationship not arising out of the loan transaction.

Lender overlays may also apply in this area, so it’s important to keep in mind that a home buyer needs to ask their lender first, before assuming their co-signing plan is an acceptable plan.

FHA also adds one other option I’ve found to be rather common. Often time parents of retirement age want to sell the family home to a child and act as a non-occupying co-borrower on the FHA home loan. According to HUD 4155.1, “If a parent is selling to a child, the parent cannot be the co-borrower with the child, unless the Loan to Value ratio is 75% or less. That means the occupying borrowers would need to come up with 25% of the sale price out of pocket. One option to meet this requirement without the actual cash is with a gift of equity from the parents and an appraisal that support value in this transaction.

If you find yourself in a situation similar to this or need to explore it further be sure to talk with a network member for more details.

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TENNESSEE HOME OWNERSHIP TOOLS

Your Home Purchasing or Refinancing & Renovation Tools,

Home Improvements, Home Renovations,

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase.

Here are just a few of the home improvements

you might consider with any Home Renovation loan

Repair or replace a roof

Install, replace or repair gutters and downspouts

Replace, repair or upgrade your HVAC system

Repair or replace plumbing

Install, repair or replace electrical systems

Kitchen remodeling (including the purchase and installation of appliances)

Bathroom remodeling, Full interior painting, Total exterior painting

Repair or replace a septic system and/or well

Disability access (wheelchair ramp, elevator, widen doorways)

Build, repair or replace a deck, patio or porch

Basement waterproofing and finishing

Abatement/Stabilization of lead-based paint hazards

Replace old windows, Room additions, Finish an attic

Add a second story to your home

Replace a termite damaged sill plate (a water-damaged sill plate also)

Possible landscaping items such as correction of grading & drainage problems,

tree removal, repair a driveway and sidewalks

FHA 203K

Your Home Purchasing or Refinancing & Renovation Tool

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

FANNIE MAE HOMESTYLE

The Conventional Alternative to FHA 203K

Great for Real Estate Investors and Second Home Renovations

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

USDA RURAL DEVELOPMENT

Up to $10K for Home Improvements, Renovations or a Simple Remodel

Mortgage Loan Officers, Real Estate Agents & General Contractors are ready to assist you

A SIMPLE HOME SHOPPING INSPECTION TOOL

Organizing your home shopping experience affords a wise decision-making process.

This simple home inspection tool makes your ultimate buying decision a smart one.

To print this document, click on “Open in New Window” located at the lower right corner;

click on “File”; then click on “Print”. In the center of the screen you will

have the option to “Create A Printable PDF of the Presentation”.

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