Being A Co-Signer: How Will Affect My Qualifications For A Future Mortgage?
Many family members help each other out by co-signing for their loved ones when it comes to getting a loan especially for a home mortgage loan or an automobile loan. If you co-sign for anyone, the monthly payment is reflected on your credit report and will count against your debt to income ratios when calculating for debt to income ratios.
FHA Loans Allow Non-Occupied Co-Signers
For home buyers who do not qualify for a FHA insured mortgage loan due to high debt to income ratios, FHA allows borrowers to have non-occupied co-signers who are family members to qualify for income. Many potential family members who are asked to co-sign are reluctant to do so because they feel it might hurt their chances of purchasing their own home in the future. However, this is not the case if the co-signer can provide proof to the mortgage lender that he or she is not liable for making the monthly payment as a co-signer. The main borrower needs a minimum of a 12 month payment history in order for this practice to apply. The co-signer needs to provide the mortgage lender with proof of 12 month’s cancelled checks from the main borrower to prove that he or she has nothing to do with the monthly mortgage payments for the main borrower. Once the mortgage lender sees proof, then the monthly mortgage payments are exempt from their debt to income calculations and they are set to go ahead and proceed with their new mortgage loan. If you are a co-signer for someone, you will be taking on the risk of having your credit potentially damaged if the main borrower is late on their monthly payments or if they default on their loan obligations.
Being A Co-Signer For Other Debt: Will That Impact My Mortgage Application?
If you are a co-signer for someone and that person has made timely payments for at least twelve months by bank checks and can provide you with 12 months cancelled checks, you can exclude that monthly payment obligation from your debt to income calculations when you apply for a mortgage loan. It needs to be proven only by cancelled checks. Cash monthly payments do not count even though the main borrower may have paid receipts.