Sunday, July 8, 2012 - Article by: Derick Condron - Right Start Mortgage -
Have you tried purchasing a home in the last couple of years and been declined because you didn't have sufficient income? There may be a way to fix this! FHA allows for buyers to use a non-occupying co-borrower to qualify for a home loan.
When looking at using a non-occupying borrower you are allowed to have a minimum down payment of 3.5%. The property qualifies for a FHA non-occupying co-borrower when the subject property is one unit and when the non-occupant is related to the occupying borrower by blood, marriage or law. Additional longstanding family type relationships can be established and allowable for maximum financing as well, on a case-by-case basis. An example might include a God-parent co-signing for a God-child. When the non-occupying borrowers are not related by any of the situations described above, loan-to-value is limited to 75%, which then increases the down payment from 3.5% to 25%.
FHA's non-occupant co-borrower options are perfect for a number of situations, such as the following:
- Occupying borrower is a college student with limited verifiable income for qualifying purposes
- Occupying borrower works for cash income
- Occupying borrower has been self-employed for less than 24 months and thus has non-allowable income for qualifying purposes
- Occupying borrower recently made a complete change in employment field and has non-allowable income for qualifying purposes
- Occupying borrower has no credit and cannot provide non-traditional credit sources (must still have a qualifying credit score)
- Occupying borrower recently received a large pay increase not consistent with earnings history rendering income non-allowable for qualifying purposes
- Occupying borrower is between jobs or assignments rendering qualifying income not useable
- Occupying borrower was recently discharged from military or is expected to be discharged from military in near future and has not secured civilian employment for qualifying income
- Occupying borrower is recently returning to the workforce after an extended leave of absence
How does this work you are probably asking at this point
The process of becoming approved for the mortgage at this point, is the same as any FHA mortgage. You will be asked to prove 30 days proof of income and 60 days of assets, all parties will need to have a middle credit score over 620. Any large deposits will need to be addressed, as will any disputes on your credit report.
If this is going to be used for a purchase transaction you will provide the pay stubs and bank statements for your pre-approval letter to your agent letting them know what you are approved for. Once you have found your house and are under contract we will get the final full needs list gathered, an appraisal ordered, and submit your file to the underwriters for final approval!
Call or email me today for more details and to get your pre approval today!!
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