Structuring fha loan with partner

5 Replies

Situation: sister is eligible for fha loan but lacks funds to close or pay a down payment. I found a duplex that would be a nice start for investing that we could partner on.

I’m looking for advice to structure a deal where she takes mortgage in her name, I pay all associated fees and am put on deed.

Since this place won’t cash flow with only one rent I would pay the difference allowing her to save up capital for a year for her first deal.

Is there a smart way to structure this, should we take the fha and cashout refi in a year allowing her to start a house hack on her own in the future?

Is there anything I’m not considering?

You need to live there too if you are going to be on the deed for an FHA loan otherwise it is mortgage fraud. You can give her the down payment but it has to be a gift not a loan for FHA to recognize it as valid, if not again mortgage fraud.

@Brian Brusich there is a lot of rules and details to FHA loans and that's why there is a lot of confusion to them. You CAN be a non-occupying borrower with FHA loans but your sister would need to occupy the property...or vise-versa. Either you or her would need to occupy the property.

When using FHA loans to purchase a property it is very common for a property to not cash flow since one person must occupy it. The benefit to using FHA money is that you can have a low downpayment towards any 1-4 unit property...and they are also more flexible with qualifying than other conventional loans. However, and this is a big one, when having a non-occupying coborrower...you must have 25% for your downpayment with a 2-4 unit property....which would make this loan type likely to be not an option. Other loan types would not have such a downpayment requirement. And all of this is why there is so much confusion with these loans. Hope this helps in some way.

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