Do I need atleast 15% for FHA if I have family cosigner (duplx)?

11 Replies

Hi everybody! I am looking at purchasing my first home within the next couple months. I'm facing a roadblock that I would love to get feedback from those familiar with FHA guidelines.

The house I am looking at is a duplex. I plan on house-hacking it. I have a non-occupant cosigner (sister).

2 lenders I spoke with told me I would need 15% down, instead of the 3.5%, as a consequence of having a cosigner.

Then, just today I spoke with a lender who told me those lenders don’t have a clue what they are talking about and he could help me.

Why am I hearing different things? Who is right here? Has anyone faced a similar situation? If I need 15% down, what are my other options here?

Thanks much. 

@Edwin Rajkumar Guidelines from FHA:-

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.

Thanks for the response Harjeet.

Does FHA consider cosigner and co-borrower as the same thing? I just need my sister to qualify for the loan amount. She holds no ownership interest in the property and will not be making any of the payments.

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@Edwin Rajkumar

You are hearing different things, because there are different rules with FHA for a SFR versus a MFR.

If you are purchasing a SFR than you could use your sister as a co-signer.

2 - 4 units requires 25% down if you are using a co-signer, even if it is family. 

On another note, you can use 75% of potential rental income on the other unit to apply towards the income to help you qualify. 

You would be better off going with Freddie Mac and 15% down using a co-signer for a duplex, if the above option won't work.

@Edwin Rajkumar under 2 years and greater than 1 year is an underwriters discretion - but not an automatic approval. It will help your case to have more in reserves and good credit. 

Your sister would be required to move into the property to be a co-borrower, and yes that would solve your problem. 

@jerry padilla 

Thanks Jerry! One of the lender I talked to said something along the lines of, "we go by primary intention." Aka, since I originally said my coborrower will be nonoccupant, they wont reconsider? Is that true or is it a matter of convincing them/pushing them a bit? 

@Edwin Rajkumar

Typically, once you tell an underwriter there is no intention of your sister living in the property, it can be hard to undue, or later convince otherwise.