FHA Question: Co-signers vs. Co-borrowers, & 3.5% down on duplex

[Michael McEwan]

Hi all,

I have recently run into a roadblock in getting my first property. I have found some differing information regarding FHA loans on multifamily properties. I found a forum post from 4 years ago that asked the same question, but I still have some other questions.

1. Can you get a duplex (or 3-4plex) using a FHA loan with 3.5% WITH a non-occupying cosigner, such as a blood relative?

2. This question informs the first: There seems to be a difference under FHA guidelines between a cosigner and a co-borrower. It seems pretty clear to me that with 2-4 unit properties, you cannot have a non-occupying co-borrower under FHA guidelines. However, what about a cosigner (assuming there is a difference) with no ownership interest in the property? Would that be allowable under a FHA loan?

To provide context, there is a duplex that I would like to occupy as my primary residence. I would like to rent out the other side. I would like to finance 96.5% of the purchase price. I would like my parent to cosign on the loan with me, as I would not qualify for it on my own. I know that you can finance 96.5% with a non-occupying co-borrower that is blood related, EXCEPT on 2-4 unit properties. However, since FHA differentiates between co-borrowers and cosigners, would this affect things if she were a cosigner, NOT a co-borrower?

I greatly appreciate any insight anyone could give me on this matter.

[Michael McEwan]

I forgot to get back here with my findings.

HUD's official ruling is that you cannot have a non-occupant anywhere on the mortgage, it does not matter if they are cosigner or co-borrower, on a 2-4 unit property.