FHA loans are pretty unique in that they permit a homebuyer to use a relative to help them qualify for a home even if that relative will never live in the home. They are in effect a non-occupant co-borrower. The normal conventional loan is more stringent on this type of qualification which is why it works well for FHA loan financing.
The relative who will not occupy the property is primarily assisting the owner-occupying relative qualify with income, not their credit score or history. All borrowers will need to qualify on credit.
As a result there is a lot of popularity in FHA loans. The amount has increased by 300-hundred percent from a year ago. Moreover, The Federal Housing Administration (FHA) stated earlier in the year, specifically May of 2008 that they will permit non-occupying co-borrowers on FHA mortgage refinances.
This is a very significant guideline, to permit a non-occupying co-borrower to assist a relative in need to refinance their home. Numerous loans were steered away in the prior year, when trying to refinance out of their variable rate mortgage that was adjusting higher. Many instances with prospects possibly saving $200 a month or more were not approved because their income was not sufficient for FHA refinancing eligibility. Without the change, it could have put many homeowners into a worse position, such as foreclosure, if they were not allowed to refinance and lower their mortgage payments.
For non-occupant co-borrowers in a FHA refinance transaction, it is available for both cash-out refinances for debt consolidation or simply refinancing the existing loan amount. Although, for cash-out refinances are limited to a maximum of 85% of the property value on loans with non-occupant co-borrowers.
