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FHA Mortgage - Non-Occupant Co-Borrower

by Matt
(Arizona, USA )

My name is Matt and my mom owns a home in California that has been paid off for almost 15 years.

My father died a year ago so she bought a second home where she lives now most of the year in Nevada. She has a VA loan on that one (my father was military).

She wants to buy a 3rd home in Arizona since I live here and wants to have it so when she visits she can have a place to stay.

It is not technically an investment property although I will live in the home and pay her for allowing me to stay there, to contribute even if it will be very little money.

Can she buy a 3rd home that will not be her primary residence in Arizona? She does plan on putting 25% down and can afford it. If so, what is the current mortgage interest rate? And, what debt ratio must she meet or be below to get approved for a loan on her 3rd home?

Not sure what information you need, but she has excellent credit rating, pays about $2200 a month toward her living expenses, including her 15 year home loan in Nevada. She has $7000 income monthly. Hope you can help.

Thank you!
Matt

=====ANSWERS=====

Hi Matt,

First of all allow me to thank you for visiting my website. I would especially like to commend you for offering me plenty of details (while maintaining your privacy) so I can give you good information.

You did not mention this, but if your mother is wanting to purchase a 3rd home using the VA mortgage, that will not work. You can only have one VA loan at a time.

These questions are good ones, even though not quite in line with the theme of my website, I would like to share with you some ideas.

You mention that you will be living in the third home. You also stated that you will be helping to pay the mortgage along with your mother.

One way to approach it may be this. Perhaps you could be the primary borrower buying the house and your mother could become a non-occupant co-borrower.

FHA allows for this in situations where the person buying the home may lack sufficient income to meet the DTI ratio on the mortgage. With FHA the max DTI is 29%. As you may know, this means that your mortgage payment (including principal, interest, taxes and insurance) cannot exceed 29% or your gross monthly income.

So if your income was on the low side, your mothers income can be used to help meet the mortgage obligations.

It sounds like credit and down payment is not an issue with your mother.

The only unknown we have here is your credit, job history and income. If your credit score is below 580, it does not matter what your mothers credit score is, it will not help you. One other thing, you would need to have been working for the past two years.

As far as interest rate on an FHA loan, you will need to get a quote from a loan officer. If I quoted you a rate that is considered a loan application according to RESPA law. I am no longer in the mortgage business.

However, you can visit my page on FHA mortgages and find out lot's more information. I also have some recommended lenders there on that page that understand FHA mortgages very well.

Now if it is just not possible to go this route, then the only other way I can see this deal working is your mother buys the house as an investment property, creates a lease with you and settles it that way. This may or may not require a larger down payment since lenders do not have much of a desire for investment properties right now.

I hope this offers some possible solutions for you.

Thanks again for coming by my site. Please help me out by liking us at FaceBook or giving us a shout out in Twitter.

I wish you the best.

Regards,

Jeff

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