30 year fixed FHA, 55% DTI on 2-family in Brooklyn with family member co-borrower. Is this at all possible?

Asked by xjazzwreck, Brooklyn, NY Tue Jun 19, 2012

After getting Pre-approved my broker just informed me I was turned down because of a guideline he was not aware of after I had an offer on a house accepted. Is this loan at all possible?

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Rob Weber, Mortgage Broker Or Lender, Plainfield, IL
Wed Jun 20, 2012
If your LO can't quote guidelines (and when I say that, I don't mean "just" the lender overlays), you should probably branch out to someone who can for a second opinion, at the very least. It's important to know the difference between the guidelines and a lender's overlays.

If you're putting down 25%, this is a doable deal by any lender who doesn't have an overlay to permit a non-occupying co-borrower transaction on a multi-family properly (Two of my previous companies prohibit this though a few lenders out there will allow this still, my current company included).

The guidelines directly from the HUD handbook:


Here's the copy/paste of a HUD letter (easier to read than straight guidelines):
The purpose of this provision is to enable a family member to have a joint interest in a property that would enable another family member to attain principle residence homeownership.
All borrowers regardless of occupancy status must sign all documents relating to the purchase of the property. This provision is not intended to circumvent FHA?s ban on loans to private investors. Mortgages with non-occupying co-borrowers are limited to one-unit properties if the LTV will exceed 75%. If a parent is selling to a child, the parent cannot be the co-borrower with that child on the new mortgage, unless the LTV is 75% on less.

For maximum financing the non-occupant borrower must be related by blood, marriage, law or be an unrelated individual that can document evidence of a family-type, longstanding, and substantial relationship?not arising out of the loan transaction.

Non-occupying co-borrowers must have a principal residence in the U.S. unless exempted due to military service with overseas assignments, or a U.S. citizens living abroad.

Additional direct references:

4155.1 2.B.1.a Types of Transactions Affecting Maximum Mortgage Amount

ï‚· properties with non-occupying coborrowers

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). However, maximum financing, as described in
HUD 4155.1 2.A.2, is available for
ï‚· borrowers related by blood, marriage, or law, such as
 spouses
 parents-children
 siblings
 stepchildren
 aunts-uncles, and
 nieces-nephews, or
ï‚· unrelated individuals who can document evidence of a longstanding,
substantial family-type relationship not arising out of the loan transaction.

4155.1 2.B.3.d Restrictions on Non-Occupying Borrower Transactions

If the LTV exceeds 75%, a mortgage with non-occupying borrower(s) is
limited to a one-unit property.

In english, you can go to 96.5% on a purchase with a non-occupying co-borrower for a one-unit property.

If you need additional help with guidelines, you may email me a short question.

I hope you're still able to close on your deal!
Web Reference:  http://RobWeber.com
0 votes
Gail Gladsto…, Agent, 11743, NY
Wed Jun 20, 2012
Call Brian Tom of Cliffco Mortgage Bank.

He said it is very high risk, but POSSIBLE.

Good luck.
0 votes
Mitchell Fel…, Agent, Brooklyn, NY
Tue Jun 19, 2012
Dear xjazzwreck:

Loans of that type can be difficult, Quite often a mortgage banker may be sincere and have good intentions when they tell you that you are qualified, but I recommend that you speak to several mortgage bankers and get an actual pre-approval. That means you will have to furnish your last 2 years tax returns and/or W-2s, last 3 months bank statements and have them run your credit report. A pre-approval is more than just a pre-qualification. A pre-approval means that you went through an underwriting process and the bank has made a commitment to lend subject to your going into contract on a property and the property appraising for the sale price.

This is really the only way you can be fully certain that you will get the loan. If I can be of further assistance, please let me know. Good luck!

Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783
Email: MitchellSFeldman@aol.com
0 votes
Trevor Curran, Mortgage Broker Or Lender, Great Neck, NY
Tue Jun 19, 2012
Good evening xjazzwreck,

Sorry to hear about your situation. It's really a shame when a mortgage professional doesn't take the time to properly prequalify a client and thoroughly study the guidelines for that client's specific situation.

To answer your question: Yes, it may be possible to qualify with a 55% DTI on a 2Family home Purchase under current FHA Guidelines. The fact is, in today's market, we are less likely to use rental income to assist in qualifying and thus we are often going to 55%DTI without the rental income. This is one of those new "risk-based overlays" the secondary market foists on us hard-working Local Mortgage Bankers.

I'd be happy to meet with you and review your prequalification; you can rely on my 22+ years experience and the fact that I am a Licensed Mortgage Loan Originator (see my License number below) who works for a DIRECT LENDER (see information below). We'll review the building blocks of a successful mortgage application: IAC or Income, Assets, and Credit and I'll give you a quick, accurate answer to your question on what you'd be qualified for.

In the event you are shopping around to other mortgage professionals, here is some advice on how you can make the best selection:

1. ALL Loan Officers working for Mortgage Bankers and mortgage brokers must be Licensed under the SAFE Act of 2008. The National Mortgage Licensing System oversees our licensing and education. Our licenses can be found for verification at http://www.nmlsconsumeraccess.com You can verify if a Loan Officer is Licensed AND Authorized to do business in your State. You can also click on "Employment History" to get a sense of the experience level of the L.O.

2. L.O.'s who work for regular banks are not Licensed; they are Registered. You can verify the same information on the same website.

3. ALL OF US Mortgage Professionals, whether Licensed or Registered are required to include our NMLS License number in (and I quote) "ALL communications except internal company communications." Therefore, beware of Loan Officers who betray their disrespect for this important regulation by failing to include their NMLS number when they respond to you.

4. Experience will work best for you, so you definitely want to check the employment history on the NMLS website to see your Loan Officer has 10-15 years minimum experience in the mortgage business.

5. Local Mortgage Bankers, or Direct Lenders, are the place where you'll find the highest quality of service and accuracy for your mortgage needs. Mortgage Bankers are also Licensed with New York State Dept. of Financial Services and with NMLS

Once again, I'm sorry to hear about your situation. I'm happy to help, if you'd like. At the least, I hope my information is useful to you in finding a competent, experienced mortgage professional to work with.

Good luck!

Trevor Curran
NMLS #40140
Office: 516-829-2900
Mobile: 516-582-9181
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
NMLS#3528 http://www.phsloans.com
0 votes
Ed Groussman, Mortgage Broker Or Lender, Hackensack, NJ
Tue Jun 19, 2012
call me 347-903-5626

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