We answer many questions about FHA home loans in the comments section. Here’s one of the most recent, on the subject of mixed-use properties, co-borrowing, and more: “My sister and I want to buy a house that is 1/2 apartment, 1/2 store. I already own a home and have an 820 credit score. She has a 620 score, and would be the owner occupant. I am married. Does my husbands income affect the debt to income ratio? If not, am I only calculated as responsible for 1/2 of our mortgage payment each month?”
There are several issues that can affect the answers to these questions. To begin with, let’s examine what FHA loan rules in HUD 4000.1 say about transactions with non-occupying co-borrowers:
“A Non-Occupying Borrower Transaction refers to a transaction involving two or more Borrowers in which one or more of the Borrower(s) will not occupy the Property as their Principal Residence.”
“Maximum LTV for Non-Occupying Borrower Transaction
For Non-Occupying Borrower Transactions, the maximum LTV is 75 percent. The LTV can be increased to a maximum of 96.5 percent if the Borrowers are Family Members, provided the transaction does not involve:
a Family Member selling to a Family Member who will be a non-occupying co-Borrower; or a transaction on a two to four-unit Property”
The property in this transaction would seem to violate the “multi-unit” rule mentioned above, so it’s entirely possible the loan would require a higher down payment based on a reading of the rule above. It’s best to have a conversation with a loan officer to see what may be possible under FHA loan rules in this area.
Second, FHA loan rules generally limit the non-residential nature of a property to be purchased with an FHA loan mortgage to 49% or less. According to HUD 4000.1:
“The non-residential portion of the total floor area may not exceed 49 percent. Any non-residential use of the Property must be subordinate to its residential use, character and appearance. Non-residential use may not impair the residential character or marketability of the Property. The non-residential use of the Property must be legally permitted and conform to current zoning requirements.”
Again it’s best to talk to a loan officer to examine the specifics of a given property to see what may or may not be possible with an FHA mortgage.
The debt-to-income ratio question would depend greatly on state law–some community property states may have different requirements than others so it is important to have a conversation with a loan officer in this area, too in order to determine how/if state law affects an FHA loan application in cases like these. Lender standards would also apply.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: