2016 FHA Co-Borrower Guidelines

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2016 FHA Co-Borrower Guidelines

2016 FHA Co-Borrower Guidelines: Intro

2016 FHA Co-Borrower Guidelines: as of September 14, 2015, HUD has launched their new handbook HUD FHA 4000.1 which goes into detail about a lot of the many changes which have been made to FHA Lending Guidelines.  To begin with, FHA Loans are by far the most popular loan program in the country for the fact that the lending guidelines are much more lenient than Conventional Loans which follow Fannie Mae and Freddie Mac guidelines.  Buyer’s from all walks of life can get approved for FHA Loans even if they fall under the following scenarios: low credit scores, derogatory items on their credit history, outstanding collection accounts, prior Chapter 7 bankruptcy, prior Chapter 13 bankruptcy, prior foreclosures, prior deed-in-lieu foreclosure, tax lines, judgments, and even high debt to income ratios.  FHA Loan Programs are there for these individuals with less than perfect credit where they would easily be denied credit by conventional loan guidelines.

2016 FHA Co-Borrower Guidelines makes home ownership possible for individuals who have minimal income, are self-employed, or get paid in cash where a lot of their income is reported normally.  Even with lower FICO credit scores, borrowers can get approved for an FHA Loan with less than perfect credit as long as they have documented income.  The key here being documented income, or income at all, and if this isn’t applicable, 2016 FHA Co-Borrower Guidelines allows for a co-borrower on the mortgage transaction.

2016 FHA Co-Borrower Guidelines: FHA’s Take

2016 FHA Co-Borrower Guidelines states that for you to be eligible for a non-occupant co-borrower on your FHA Loan, the non-occupant co-borrower must be related to the main borrower by blood, law, or marriage.  What this means by the 2016 FHA Co-Borrower Guidelines is the following people would be able to be a co-borrower: parents, brother, sister, grandparent, son, daughter, son-in-law, daughter-in-law, mother-in-law, father-in-law.  When you are shopping around for your loan there are borrowers out there who won’t look too deeply into the relationship of the co-borrower as long as the co-borrower has the proper income and credit to get the original borrower approved.  These non-occupant co-borrowers will need to go on the mortgage paperwork, but not necessarily on the title for the home unless you want them to.

2016 FHA Co-Borrower Guidelines: Case Scenario

For the 2016 FHA Co-Borrower Guidelines let’s take a look at a quick case scenario to illustrate how the approval process will take place for a loan like this.  When the primary borrower adds a co-borrower to the mortgage loan, the co-borrower’s credit will be evaluated for use.  By the 2016 FHA Co-Borrower Guidelines the credit score that is going to be used is the lowest of the two middle credit scores.

–          Main Borrower: 620 TransUnion, 690 Experian, 655 Equifax; middle score will be 655 Equifax

–          Co-Borrower: 630 TransUnion, 690 Experian, 610 Equifax; middle score will be 630 TransUnion

–          In this case scenario, the lowest middle score is the Co-Borrower’s 630 TransUnion credit score.

2016 FHA Co-Borrower Guidelines does allow the flexibility to bring in a co-borrower and the both of you will use a blended credit score calculation by taking the lowest of the middle scores.  There are many scenarios where multiple co-borrowers can be used if you are looking for a certain income threshold or the proper debt to income ratio.  An experienced loan originator like myself is your first step to home ownership.  If you call me at 888-900-1020 we can go over your options in getting you in that new phone.  If you’d rather email me you can at contact@loanconsultants.org or visit Loan Consultants at www.loanconsultants.org.

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