Lenders from the U.S. Federal Housing Administration take your finances into account before they lend any money. You need to meet certain financial requirements before they can consider approving your mortgage application.
However, even if you don’t quite meet the minimum requirements, you may still get an FHA loan. For example, can you have a cosigner on an FHA mortgage, and if so, what requirements do they need to have? A trusted mortgage broker in Houston, TX, can help simplify the process for you, as we have below.
FHA Mortgage Requirements
As mentioned, FHA mortgages have specific financial requirements:
- Your debt-to-income ratio must be below 43%
- You must pay a mortgage insurance premium (MIP)
- The home for which you want the FHA mortgage must be your primary residence
- You need a steady income and a way to prove employment
- Your Fair Isaac Corporation (FICO) score should be 580 or more for a 3.5% down payment agreement
- For a FICO score between 500 and 579, you must put down a 10% down payment
You can check your credit score with one of the three main credit bureaus: Equifax, Experian, and TransUnion. They each use a different FICO score for mortgage lending, so you should find which credit report your potential FHA mortgage lender uses in their determination.
Reasons You May Want a Cosigner
As much as home buyers would like to meet FHA qualifications, certain circumstances may make that difficult. For example, someone with a debt-to-income ratio of 54% after a car accident likely wouldn’t qualify for an FHA mortgage.
Still, you should have more options and opportunities to purchase and own a home. So, in what ways can you have a cosigner on an FHA mortgage? You can have a cosigner but only if their circumstances fit under Texas laws on mortgage origination.
Some Cosigner Requirements to Note
While we don’t have the full list here, these do’s and don’ts can help you determine who can be a cosigner on your FHA loan.
Do’s:
- Consider a cosigner if you have spotty employment records
- Have a cosigner who meets minimum FHA loan requirements
- Consider possible cosigners out of family and friends with a proven relational history
- Have a cosigner who can accommodate for financial areas you lack, i.e., debt-to-income ratio
Don’ts:
- Don’t hire a person to be a cosigner
- Don’t expect your cosigner’s FICO score to accommodate your own
- Don’t acquire a cosigner who has a vested financial interest in the potential property
Can the Cosigner Have Ownership Interest?
Cosigners cannot have ownership interest in your property. Instead of cosigning, you should consider them as an occupant co-borrower. Co-borrowers can borrow the FHA loan alongside you, make monthly premium payments, and have their name on the lease.
Cosigners do not borrow money or pay monthly premiums unless the applicant fails to pay them. Again, cosigners won’t have their name on the lease but must pay default payments.
As such, many brokers would suggest that you group with a co-borrower. Because of the reward-less risk of cosigning, the relationship between an applicant and cosigner often becomes irreparably strained. Applicant and co-borrower relationships tend to be much more equal.
Need Help Buying a House?
As you prepare ways to make your FHA loan downpayment, you may find that you don’t meet minimum requirements in one way or another. Can you have a cosigner on an FHA mortgage that will accept the risk?
To explore this and other mortgage options, reach out to Champions Mortgage. Our experts help citizens in Houston, TX, and nearby areas discover and move into the homes of their dreams. Call Champions Mortgage at (281) 727-2500 or visit our contact page to start your application today.
