Two Person FHA Loan on Multi Family

Rental Property Investor · Montclair, NJ · Member since 2020 · 14 posts · 6 votes

My friend and I are considering going in on a multi family property. He is in Michigan and I am in New Jersey. Property would be in Michigan. I would not be living in any of the units and be an out of state investor.

He would move into one of the units. Is it possible to get a joint FHA mortgage along with the 3.5% down since he will be occupying it? Does it have an impact if my name is on the mortgage? Is this even possible? I know a single person can do a FHA on a multi-family.

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Andrew PostellPro Member
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
5y
@Ben Trageser the formal term for what you are describing is called a "non-occupying co-borrower"....and it has some very important destinctions:
1. Any time you are a co-borrower on an FHA mortgage, you are responsible for 100% of the mortgage. Meaning, that the entire mortgage will report on your credit report. So if you are your partner are splitting the rents...then 50% of the rent will go to you, but you will have 100% of the mortgage held against you. This will absolutely affect how you qualify for other loans in the future.
2. If you are a non-occupying co-borrower with an FHA loan, and are not related to each other, then your "Loan to Value" limit will be 75%. Meaning, you will be required to have 25% downpayment for the purchase of the property.
Now, keep in mind that FHA allows you to GIFT money to a friend....so if you want to gift your friend money for the downpayment, but not be on the mortgage, this will allow your friend to use 3.5% down and it won't affect you as described in #1 above. Maybe examine this method?
Hope all of this makes sense but let me know if you have any other questions on it. Thanks!
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Ben Trageser
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Rental Property Investor · Montclair, NJ · Member since 2020 · 14 posts · 6 votes
5y
Originally posted by @Andrew Postell:
@Ben Trageser the formal term for what you are describing is called a "non-occupying co-borrower"....and it has some very important destinctions:
1. Any time you are a co-borrower on an FHA mortgage, you are responsible for 100% of the mortgage. Meaning, that the entire mortgage will report on your credit report. So if you are your partner are splitting the rents...then 50% of the rent will go to you, but you will have 100% of the mortgage held against you. This will absolutely affect how you qualify for other loans in the future.
2. If you are a non-occupying co-borrower with an FHA loan, and are not related to each other, then your "Loan to Value" limit will be 75%. Meaning, you will be required to have 25% downpayment for the purchase of the property.
Now, keep in mind that FHA allows you to GIFT money to a friend....so if you want to gift your friend money for the downpayment, but not be on the mortgage, this will allow your friend to use 3.5% down and it won't affect you as described in #1 above. Maybe examine this method?
Hope all of this makes sense but let me know if you have any other questions on it. Thanks!

Extremely helpful. Thank you so much!
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
5y
You can also be added to the deed after the purchase.
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