FHA Loans With Non-Occupying Co-borrowers

March 10, 2015

One common question asked by some potential FHA loan applicants has a lot to do with who will sign or co-sign the loan documents versus who will actually be living in the property to be purchased. Here’s a variation on this common theme:

“I was hoping to get an FHA loan but I was wondering if my father could co-sign on my loan? I was also hoping to purchase a vehicle at the same time.”

FHA loan rules permit non-occupying co-borrowers and co-signers, but depending on the nature of the transaction the loan amount could be affected. That’s a matter you should discuss with your loan officer as lender standards may vary but there are a few things to keep in mind about FHA loan rules in this area.

If family member co-signs or co-borrows, FHA loan rules say that in cases where the LTV exceeds 75%, a loan with a non-occupying co-borrower is limited to a single unit property.

FHA home loans are only for residences that are legally declared “real property” and taxable as same. That means the property to be purchased must have a permanent foundation among other concerns. If a question like this is basically asking whether the FHA loan can be extended to include a car purchase, the answer is no.

If the question involves asking for financial advice--as in, is it ever a good idea to take out a car loan at the same time as a home loan? Much of the advice you’ll find online regarding home loans of any kind includes avoiding other large credit applications at the same time.

The reason for this includes consideration of the borrower’s debt-to-income ratio or DTI.  This important calculation and would be severely affected by two major lines of credit being applied for at the same time. It’s best to avoid committing to new lines of credit in general when applying for a home loan. Some recommend avoiding new credit applications for a full year leading up to the new loan.