What Is Occupancy and Why Does it Matter?
![question-b01-63ed52bb8278c.png](https://97a71502eb772ee741d5-eec37cd46b952dd4b9d7b7ed972b68c1.ssl.cf1.rackcdn.com/question-b01-63ed52bb8278c.png)
Occupancy Rules for FHA Mortgages
The most obvious place to begin on the occupancy issue is with buyer intent. If you apply for an FHA mortgage to build or buy a house, you must certify in writing that you will use the home as your primary residence.
Occupancy is a requirement for FHA mortgages. But not all borrowers must occupy the property--a non-occupying co-borrower is permitted under FHA loan rules.
Non-Occupying Co-Borrowers
In situations where there is a non-occupying co-borrower, the first step for some new house hunters is to learn the differences between a co-borrower and a co-signer. Co-borrowers:
- Must sign the loan paperwork.
- Are obligated on the mortgage.
- Are listed on the home's title when it is paid off.
- Are liable for the debt and must sign the Note.
- Co-signers do not hold an ownership interest in the subject Property.
- Co-signers do not sign the “security instrument,” which is a mortgage deed or deed of trust according to HUD.gov.
FHA Non-Occupying Co-Borrower Standards
FHA loan rules say that in loan transactions featuring a non-occupying co-borrower, the down payment is 25%. That down payment may be reduced to the standard FHA loan minimum required investment of 96.5%. But only under the right conditions.
What are those conditions? Family members who borrow together may be one option. But only when the loan does NOT involve a family member selling to another relative who will be a non-occupying borrower OR a home loan on a multi-unit property. Ask your participating FHA lender what is possible in your circumstances.
In cases involving a co-borrower, your FHA lender may be unwilling to approve a mortgage unless both applicants can qualify with credit, employment, and verifiable income. Typically the credit shortcomings of one applicant aren’t offset by the credit strengths of a co-borrower.
------------------------------
RELATED VIDEOS:
Understand the Reasons for Private Mortgage Insurance
Carefully Read Your Closing Disclosure
Buying a Home With a Co-Borrower
![](/assets/images/dots.png)
Do you know what's on your credit report?
Learn what your score means.
![](/assets/images/dots.png)