April 27, 2015
A reader asks, “In the case of two names on the deed (only one will be living in the home), are both incomes & debts considered for debt to income ratios?. Also is it required the mortgage co. listed on both of their Home owner Insurance?.”
There are many issues that can affect the answer to this question. Are the two people married? Related by blood, marriage, or a family-type relationship? These are important issues that can affect how much the FHA is willing to guarantee on the loan and how much down payment is required.
Also, state laws may affect how such a transaction is carried out, especially if the people buying the home are legally married. Community property states may have laws that govern how a lender is to proceed in such cases.
The FHA loan rules in HUD 4155.1 Chapter 2 Section B spells out some of the issues:
A non-occupying borrower transaction involves two or more borrowers where one or more of the borrower(s) will not occupy the property as his/her primary residence. When there are two or more borrowers, but one or more will not occupy the property as his/her principal residence, the maximum mortgage is limited to 75% loan-to-value (LTV).
Some exceptions to that 75% limit are based on family-type relationships as mentioned above. Who may qualify for the exemption? According to HUD 4155.1:
spouses
parents
children
siblings
stepchildren
aunts-uncles
nieces-nephews
Add to that list unrelated individuals who have a longstanding, substantial family-type relationship not arising out of the loan transaction.
The short answer to the reader’s question about income, debts, etc. is that all borrowers who are to be financially obligated on the loan must go through a credit check process. Your FICO scores, debt-tom-income ratio, work history and other factors will all be taken into account.
The second part of the reader’s question isn’t quite clear–it seems that the reader is asking whether the name of the mortgage company must be listed on home owner insurance documents, which would be an issue possibly affected by state law.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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