March 7, 2021

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FHA Mortgages and Non-Occupying Co-Borrowers

First time FHA loan applicants soon learn the world of FHA loans is aimed at helping people who want to become homeowners; a fairly obvious assumption to make when dealing with a government agency with a mission statement that includes helping people achieve their dream of home ownership.

But private home owners aren’t the only ones interested in buying and selling real estate; that’s one of the reasons for the strict FHA requirements that single-family FHA home loan borrowers certify the property is to be used as the primary residence.

FHA mortgage loan rules forbid using FHA home loans to buy real estate for investment purposes. Private investors have plenty of access to other lending options if they are qualified to borrow; FHA loan products are intended for residences, not investments.

But even with the strict FHA loan rules on occupancy, the FHA does make an exception; a non-occupying co-borrower may be included on an FHA home loan with that borrower is a family member trying to become a home owner. For example, a parent and child can apply together for an FHA home loan; the child may be getting ready to go away to college, but can still be listed provided all non-occupying borrowers list their status as such on the FHA loan paperwork.

These FHA loans have limitations. According to FHA requirements, “Mortgages with non-occupying co-borrowers are limited to one-unit properties if the LTV will exceed 75%.” The FHA also adds, “If a parent is selling to a child, the parent cannot be the co-borrower with that child on the new mortgage unless the loan-to-value is 75% or less.”

Non-occupying co-borrower arrangements on FHA loans can be a distinct advantage for those newly graduated from college, but the arrangement can also be helpful in some cases where a co-borrower is trying to re-establish credit histories after a bankruptcy or foreclosure. In such cases, specific minimum wait times may be required before the non-occupying co-borrower can be included on an FHA loan application.

Joe Wallace - Staff Writer

By Joe Wallace

December 23, 2010

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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