Can we say the co-borrower is living with us even if she is not?

jenurban · Joined: 10 Mar 2010 Posts: 4 1.88 Dollars($)

My husband and I will not qualify for a permanent loan (he's self employed and started another company just 1 year ago) unless we say my mom will be living with us (she's our co-borrower). Can we say that she's living with us in order to qualify, even if she may only be there part-time?

jburke · Posted: Wed Mar 10, 2010 9:23 am Post subject:

Hi, Jenurban,

If you claim she will be living with you when in fact she will not, that's mortgage fraud and not a good idea.

There is the option of doing an FHA loan with your mom as non-occupying co-borrower as long as she qualifies and you won't have to worry about whether or not what you're doing is legal. Wink

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jenurban · Joined: 10 Mar 2010 Posts: 4 1.88 Dollars($)

We had a conventional loan on our last house. I've always been made to think that an FHA loan is "bad" for whatever reason. Can you tell me the differences?

jburke · Posted: Wed Mar 10, 2010 9:53 am Post subject:

Hi Jenurban,

Really the only bad thing about an FHA mortgage is the upfront mortgage insurance premium and the fact that you pay the monthly mortgage insurance premium for 5 years.

Here are some of the good things about FHA mortgages.

1) Less money down required - conventional will require 5-10% and maybe more if you can't qualify for the private mortgage insurance
2) Depending on your particular scenario you will generally get a better rate and lower payment on an FHA loan.

Feel free to ask more questions.

jenurban · Joined: 10 Mar 2010 Posts: 4 1.88 Dollars($)

how much is mortgage insurance?
this all seems unfair when we have impeccable credit, our only debt is my car payment, and we have about 30% we can put down, we own the lot, and a more than perfect co-signer!!! so frustrating!!!

jburke · Posted: Wed Mar 10, 2010 10:20 am Post subject:

what price range are you looking at?

How long has your husband been self employed?

jenurban · Joined: 10 Mar 2010 Posts: 4 1.88 Dollars($)

the cost of construction should cost about 210,000 to 220,000. we have as much as 70,000 dollars of our own money to put into it, leaving us with a perm loan of about 150,000.

He's been self employed since 2003, but he decided to get out of that partnership and started another company (partnership) a little over a year ago (January 2009). So, because my husband is a self-motivated, hard-wroker, we get skrewed (that's how i feel! and i'm venting!)! Plus we've been living with my mom (the co-borrower) for 2 years, we have a young son, and we soooo deserve to move on and out!
thanks for all of your input!

jburke · Posted: Wed Mar 10, 2010 11:03 am Post subject:

Do you already have the construction loan secured?

Are you working with a builder?

The monthly mi on an FHA loan would run you about $68.75 per month unless you want to do a 15 year fixed FHA which wouldn't require the monthly mi due to you down payment.

What is the reason you need your mother to cosign?

At first I thought that maybe your husband hadn't been self employed long enough but he clearly has been. Is it a lack of income on your tax returns?

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Posted: Thu Mar 11, 2010 2:26 pm Post subject:

The bank we talked to said they would give us money for construction, but it was the perm financing they told us we wouldn't qualify for an "outside" loan, so they offered us an "in house" loan. we were not happy with what they offered us - fixed rate of 6.75 for 3 years for $180,000
We do have a builder, contract, budget, etc. all in order.
Yes, other than having this company about a year my husband's w-2 showed an income of only 25,000 and his k-1 from his business showed 28,000 profit. We probably should have "brought-home" more and left the company with a smaller profit???...therefore, cosigner needed.

Posted: Thu Mar 11, 2010 5:43 pm Post subject:

Here are the guide lines from one of my lenders regarding non-occupying co-borrowers. Do you think this will work for you?

• Non-Occupant Co-Borrower - Allowed with restrictions.

Exception: The occupying borrower's total debt ratio does not need to be calculated provided:
1) The occupant and non-occupant are parent and child
2) The non-occupant co-borrower must be a co-owner of the property but otherwise must not have an interested party relationship to the transaction (i.e., broker, seller, etc.).
Purchase, rate and term only
One unit SFR, condo or PUD
The mortgage must be manually underwritten
A letter from the borrowers establishing the relationship between the occupants and non-occupants is required

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