Lancaster, PA · Member since 2017 · 27 posts · 10 votes
Hi all! I understand that in order to use a 203k with a non occupying co borrower for anything between 2-4 units (basically other than a SFR), the down payment increases from the 3.5% to 25%. I am a bartender and the majority of my income comes in the form of cash. While I can afford payments, I simply cannot show it through wage reports and bank statements. Thus, my income is insufficient. I have a willing non occupying co borrower who's income more than makes up for my lack thereof, however I do not have the capital for a 25% downpayment. What, if any, are some creative ways around this? I understand the reasoning for the increase in downpayment, however in my case my co borrower is not doing this as an investment strategy, but simply to aid myself. Thanks in advance for the replies!
Lancaster, PA · Member since 2017 · 27 posts · 10 votes
9y
@Michael Cohen Thanks for the reply. Well, this directly contradicts what my lender told me were FHA guidelines. According the them, the co-borrower drives the increase on the downpayment requirement for a multi family 203k. Do I need a new lender??
Investor · Towson, MD · Member since 2014 · 472 posts · 257 votes
9y
Just confirming: if it was some random business partner, then you wouldn't qualify for an FHA loan and you would be looking at a standard investment loan requiring 25% down. Was trying to give your lender the benefit of the doubt...
OK. Yes, all FHA loans (203K is merely a subset) allow for non-occupying co-borrower and the LTV does not change; meaning your down payment is still 3.5%.
Hi all! I understand that in order to use a 203k with a non occupying co borrower for anything between 2-4 units (basically other than a SFR), the down payment increases from the 3.5% to 25%. I am a bartender and the majority of my income comes in the form of cash. While I can afford payments, I simply cannot show it through wage reports and bank statements. Thus, my income is insufficient. I have a willing non occupying co borrower who's income more than makes up for my lack thereof, however I do not have the capital for a 25% downpayment. What, if any, are some creative ways around this? I understand the reasoning for the increase in downpayment, however in my case my co borrower is not doing this as an investment strategy, but simply to aid myself. Thanks in advance for the replies!
simple you get your non occupant co borrower to be a "occupant," then you will be reduced back to 3.5% down payment instead of 25% down.
FHA has a restriction on non occupant coborrowers on 2-4 unit properties because of the risk level.
Philadelphia, PA · Member since 2016 · 54 posts · 30 votes
9y
Sounds like your simplest solution would be to partner up with the co-borrower. Sounds like it's a bit risky on your own if you're not able to secure the loan on your own and also haven't been able to save enough cash to come up with 25% down. Obviously, if the co-borrower is willing to sign they must have some level of interest in either the property or your plan to be a landlord. This will limit the risk for both parties also. Another positive is that your rental income will have a w2 and you will still be eligible for a future 203k loan and will have gained experience as a landlord all while building some equity
Hi all! I understand that in order to use a 203k with a non occupying co borrower for anything between 2-4 units (basically other than a SFR), the down payment increases from the 3.5% to 25%. I am a bartender and the majority of my income comes in the form of cash. While I can afford payments, I simply cannot show it through wage reports and bank statements. Thus, my income is insufficient. I have a willing non occupying co borrower who's income more than makes up for my lack thereof, however I do not have the capital for a 25% downpayment. What, if any, are some creative ways around this? I understand the reasoning for the increase in downpayment, however in my case my co borrower is not doing this as an investment strategy, but simply to aid myself. Thanks in advance for the replies!
simple you get your non occupant co borrower to be a "occupant," then you will be reduced back to 3.5% down payment instead of 25% down.
FHA has a restriction on non occupant coborrowers on 2-4 unit properties because of the risk level.
Thanks for your replies Albert. The co borrower has a property that he pays a mortgage on and is not interested in occupying another. What would he have to do in order to officially become an occupant (I believe he would have to have this as his "primary residence", correct?)? Would this status affect his other financials, including his income, mortgage, etc.? Also, would he be qualified for the FHA loan considering he owns other property?
Sounds like your simplest solution would be to partner up with the co-borrower. Sounds like it's a bit risky on your own if you're not able to secure the loan on your own and also haven't been able to save enough cash to come up with 25% down. Obviously, if the co-borrower is willing to sign they must have some level of interest in either the property or your plan to be a landlord. This will limit the risk for both parties also. Another positive is that your rental income will have a w2 and you will still be eligible for a future 203k loan and will have gained experience as a landlord all while building some equity
Thank you for your reply Patrick. My question is what exactly do you mean by partner up? Sorry if this seems like a stupid question!
Hi all! I understand that in order to use a 203k with a non occupying co borrower for anything between 2-4 units (basically other than a SFR), the down payment increases from the 3.5% to 25%. I am a bartender and the majority of my income comes in the form of cash. While I can afford payments, I simply cannot show it through wage reports and bank statements. Thus, my income is insufficient. I have a willing non occupying co borrower who's income more than makes up for my lack thereof, however I do not have the capital for a 25% downpayment. What, if any, are some creative ways around this? I understand the reasoning for the increase in downpayment, however in my case my co borrower is not doing this as an investment strategy, but simply to aid myself. Thanks in advance for the replies!
simple you get your non occupant co borrower to be a "occupant," then you will be reduced back to 3.5% down payment instead of 25% down.
FHA has a restriction on non occupant coborrowers on 2-4 unit properties because of the risk level.
Thanks for your replies Albert. The co borrower has a property that he pays a mortgage on and is not interested in occupying another. What would he have to do in order to officially become an occupant (I believe he would have to have this as his "primary residence", correct?)? Would this status affect his other financials, including his income, mortgage, etc.? Also, would he be qualified for the FHA loan considering he owns other property?
He would have to write a letter of explanation to state his intention and make a credible case for occupancy. If he lives 100 miles+ away from your property it be difficult to get buy in from the underwriter however if the move is a better living condition or makes sense then it could be green lighted.
Philadelphia, PA · Member since 2016 · 54 posts · 30 votes
9y
You mentioned that coming up with a 25% down payment was a little more money than you had presently so maybe you and the co-borrower can split that down payment. Also, split whatever profits and equity gets accrued. I realize you may not want to split that up keep in mind expenses will happen and it will be good to have someone share that burden as well. I know you mentioned that the prospective co-borrower didn't want to live there but if they're willing to co-sign my point was they must have some interest in the deal and if they're going to assume all that risk in co-signing they may want to receive some rewards also. If not, maybe search for another partner whose interested. If it's a profitable deal and you're willing to manage the place yourself you may have some luck finding a partner. One of the benefits of being a bartender is you talk to a lot of people