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How Does FHA Define Family Member?


How Does FHA Define Family Member: Non-Occupant Co-Borrowers

If you were wondering how does FHA Define Family Member you will find out in the following article.  FHA or the Federal Housing Administration which is overseen by HUD or the United States Department of Housing and Urban Development has their own guidelines on how does FHA Define Family Member.  The definition of a family member will be gone over when we get to the section about non-occupant co-borrowers on a home purchase.  FHA will allow for non-occupant co-borrowers to be included on a home loan purchase when the original borrower for the FHA Loan cannot qualify on their own due to factors such as minimal or no income.  Trying to add on a co-borrower may be pretty simple since FHA has no rules or restrictions to how many non-occupant co-borrowers can be added to the main borrower’s FHA Loan application.  The one main requirement is that any non-occupant co-borrowers are a family member.

How Does FHA Define Family Member: Non-Occupant Co-Borrowers

Before we get into how does FHA Define Family Member, it is first smart to go over what exactly a non-occupant co-borrower is going to be expected to do or what type of situation they are walking into.  Non-occupant co-borrowers are needed when the main borrower will have troubles getting approved due to no income or minimal income which results in them having a debt to income ratio that exceeds the maximum for FHA guidelines.  These guidelines are 56.9% if the borrower has a 620 FICO credit score or greater, or it is 43% if the borrower has a FICO credit score under 620.  If you are a borrower and you can’t meet these minimum requirements you will need to know how does FHA Define Family Member since you may need one or several to get your loan approved.

Credit Scores Determined With Co-Borrowers

If you are wondering how credit scores are determined and what will be used when you need co-borrowers, it is actually a pretty simple calculation on how this will happen.  Per FHA Guidelines, no matter how many co-borrowers you have, the only credit score you are going to use for qualification purposes is the lowest of all the middle scores.  Let me illustrate this scenario for you below:

–          Borrower A: 540 TransUnion, 620 Experian, 660 Equifax

–          Borrower B: 555 TransUnion, 650 Experian, 630 Equifax

–          Borrower C: 565 TransUnion, 640 Experian, 645 Equifax

In this scenario the 3 middle credit scores are 620 Experian, 630 Equifax, and 640 Experian.  The lowest of the middle credit scores would be Borrower A’s 620 Experian score.  As long as you are going to be using this co-borrower on the FHA Loan application, 620 is the FICO credit score to be used.

How Does FHA Define Family Member: Who Is It?

Finally, we can get to How Does FHA Define Family Member and for this we are going to have to reference the FHA Guidelines in the HUD 4000.1 Handbook.  In this publication, you will see how FHA Define Family Member and you can see it in the list below:

  1. Child: Defined as a son, stepson, daughter, or stepdaughter
  2. Parent of Grandparent: Includes step-parent, grandparent, foster parent, or foster grandparent
  3. Spouse or Domestic Partner
  4. Legally adopted son or daughter
  5. Foster Child of Borrower
  6. Brother or Stepbrother
  7. Sister or Stepsister
  8. Uncle of the Borrower
  9. Aunt of the Borrower
  10. Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, sister-in-law

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