FHA Loan- Parent Co-Signer

Under the FHA rules, a parent can co-sign a loan for their child.  The property is owned in the child’s name, not co-owned with the parent.  FHA puts all of the income and debt into one calculation, so it is possible to have a child who does not earn any income purchase a property using FHA financing with a parent co-signer.

Regarding the number of properties that can be purchased, it appears that we’re in a grey area.  An FHA buyer cannot buy another property using FHA unless the previous home has been sold.  That specific rule doesn’t apply to a non-occupant co-borrower, so a parent who has an FHA loan can co-sign for an FHA loan for their child.

The discussion of multiple properties financed this way is addressed, the specific comments are:

“Transactions in which parents help their children buy their first home are permitted as long as the non-occupant co-borrower is not developing a portfolio of rental properties”

and

“The amount of the financial contribution by the non-occupant co-borrower and the number of other properties similarly owned must be looked at closely.”

So, if you’re co-signing parent has a bunch of other properties, then we may be in trouble.  If the kids involved are close to qualifying in their own, especially if they all live in different areas, then we should be ok.  Obviously, if the kids all buy houses right next to each other, then we’re in serious trouble.

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