Frequently Asked Question: Can I Put Just 3.5% Down for an FHA Mortgage on a 2-Unit Property with a Non-Occupant Co-Borrower?

Frequently Asked Question: Can I Put Just 3.5% Down for an FHA Mortgage on a 2-Unit Property with a Non-Occupant Co-Borrower?

Q: I would like to buy a 2-family home with an FHA mortgage and live in one of the units. But I need my mother as a non-occupant co-borrower to help me qualify for the mortgage. Can I buy the house with just 3.5% down payment?

A: No. If there is a non-occupant co-borrower and you are purchasing a multi-family residence (i.e., 2-, 3- or 4-Unit property), then you must put at least 25% down.

When there are two or more borrowers, and one or more of those borrowers will not occupy the property as their primary residence, and you are putting less than 25% down, then the subject property must be a single family residence.

FHA instituted this rule to guard against non-occupant co-borrowers from developing a portfolio of rental properties. The degree of financial contribution by the non-occupant borrower, and the number of properties similarly owned, may indicate that an investor loan has become the practical reality and that, in effect, family members or non-occupant co-borrowers would be acting as "strawbuyers."