When Mom and Dad Want to Help

With all the recent changes in the industry, there’s still a place where the FHA Mortgage is the best option.  One of those situations is a mortgage with a Non-Occupying Co-Borrower.  This happens most often when your parents want to help you out by co-signing in order to be able to use their own income, even though they won’t live in the new property.  This is the case fairly often with single First Time Homebuyers, and FHA insured loans are really the only option for these Borrowers. 

For Conventional mortgages, the Buyer will still need to be able to qualify solely based on his/her own income, no help from Mom and Dad.  Also, 5% of the downpayment HAS to be their own funds, no matter what.  With the FHA, ALL of the downpayment and closing costs can come from a family member.

As a result the only true option for a Borrower that cannot qualify to purchase a property on his or her own income is FHA.  FHA not only allows for the assets from the Non-Occupying Co-Borrower to be used, but the income of them as well.

The Non-Occupying Co-Borrower has to be related by blood marriage or law (spouse, parent/child, siblings, step-children, aunt/uncle, niece/nephew, etc.  Or it can be a close friend with a “family-type relationship not arising out of the loan transaction”.

Until Conventional changes their guidelines, FHA will continue to be the only true option for Borrowers that cannot qualify to purchase a property on his or her own income.  I’d like to hear your thoughts on this little nuance of the industry.

Keith S. Turner
NMLS# 820813
Mortgage Loan Representative | The McCue Mortgage Company
Eight Union Street | New London
860-444-0650