Statistics

In 2018, around 12% of purchases were done as a multi-generational home.

In 2024 it landed at 17% the highest ever recorded

Here's an article from the Boston Fed suggesting the trend isn't slowing down

As home prices and affordability issues rise, solutions like multi-generation homes tend to rise as well.

In an attempt to educate with my click-bait headline, I thought it brought up a question a first time buyer might ask.

How many borrowers can be on a mortgage?

No hard limit, but normally 4

There isn't technically a limit on the guidelines for the most common loan types (VA, Conventional, FHA, USDA)

But the underwriting software (AUS and GUS) cap it at 4 borrowers.

Even if you didn't use the underwriting software (manual underwrite vs AUS) most lenders have frameworks built around a maximum of 4 borrowers.

So even though there aren't guidelines prohibiting more than 4, you'll likely run into 4 borrowers max.

With a VA loan, for full entitlement benefits, it's limited to the veteran and the spouse.

You can add more borrowers, but that affects how much is covered by the VA.

This means you'd likely need a down payment if you wanted more borrowers than the veteran and the spouse.

Can you buy with friends and not family?

Yes, but here are a few extra rules with FHA lending.

If the friend wants to buy, and doesn't want to live in it, they are considered a 'non-occupying' co-borrower.

This is allowed, and with a conventional mortgage it doesn't change anything.

But FHA wants a much larger down payment than the minimum. (25% instead of 3.5% down)

Have you ever heard of someone quitting their job, and moving to self employment, then to say "I wanted to be self employed, but I just bought a job instead"

Buying a home with friends will feel like that. You tried to quit the apartment living, only to buy yourself roommates.

Hopefully they are great roommates.

How is DTI calculated?

DTI (debt to income) will be calculated by taking everyone's income ÷ everyone's debt

Here's an example:

• Borrower 1 makes $2,500 per month
• Borrower 2 makes $2,500 per month
• Borrower 3 makes $2,500 per month
• Borrower 4 makes $2,500 per month

Total of $10,000 per month

• Borrower 1 has $500 per month in debts
• Borrower 1 has $100 per month in debts
• Borrower 1 has $1,000 per month in debts
• Borrower 1 has $800 per month in debts

Total of $2,400 in current debts

If the new house was $3,000 per month then the total debts would be $5,400 and the total DTI Ratio would land at 54%

54% doesn't work for conventional mortgages, but it's within FHA"s maximum thresholds.

FHA allows two types of debt to income ratios

Front end (housing payment) and back end (total debt)

The Housing to Income ratio cannot exceed 46.99%

The total debt to income ratio cannot exceed 56.99%

The max allowable ratios here are 46.99%/56.99%

In this case, the housing to income ratio ($3,000 ÷ $10,000) is 30%

The total DTI is 54%

30%/54%

Can buying a home with an ADU help me qualify for a bigger house?

Yes, as long as the ADU is legal or legal non-conforming, and has its own entrance.

The unit doesn't need a lease in place, and the potential rental income can be supported by an appraiser.