Co-Signing For A Home: Can I Qualify For A Mortgage?
FHA insured mortgage loans allow mortgage borrowers to have non-occupied co-borrowers to be added to the loan in order to qualify. Mortgage borrowers who have income but cannot document the income because they are self employed or are paid in cash often times cannot qualify for a FHA insured mortgage loan by themselves. Many folks co-signing for a family member for a home purchase are extremely concerned on the risks associated with co-signing for the family member. They are often put in a tricky situation where they do not want to say no but yet, they want to help the family member get their home. Those non-occupied co-borrowers often call me because they are terrified that by co-signing a mortgage loan as a non-occupied co-borrower, it will affect them getting a mortgage in the near future. The good news is that it will not affect them in getting a new mortgage loan but there are risks involved in co-signing not just a mortgage loan, but any loan in general.
Co-Signing For A Mortgage: Risks Versus Rewards
The rewards of co-signing is helping a loved one making their dream of homeownership come true. Without co-signing as a non-occupied co-borrower, the chances are that the main borrower will not qualify for a mortgage loan. The risks associated with co-signing on a mortgage loan is that it is not a short term obligation. Most mortgage loans are 30 year fixed rate mortgage loans and unless the main borrower refinances or sells their home, the co-signer will be on the note and responsible for the note in the event if the main borrower defaults on the mortgage loan. In the event if the main borrower is late on the mortgage, the late payment history will be reported on the co-signer’s credit report as well. In the event if the main mortgage loan borrower defaults on his or her mortgage loan, the co-signer will be responsible for the note.
Can Co-Signing Hurt The Chances Of Co-Signer Getting A Future Mortgage Loan?
Co-signing does create risks for the co-signer only if the main borrower is late on their mortgage payments or defaults on their mortgage loan. In most circumstances, the main borrower will not let it happen and will discuss with the co-signing borrower in the event if they are experiencing financial difficulties. If the main borrower pays their mortgage payments on time for a minimum of 12 consecutive months and thereafter, the monthly mortgage payment will not be counted on the co-signer when the co-signer applies for a mortgage loan. The co-signed mortgage loan payment will not have any impact on the debt to income calculations for the co-signing borrower as long as the main borrower can provide the co-signer 12 months of cancelled checks without a single late payment.
Co-Signing Can Be A Win Win Situation
Co-signing for a family member for a home purchase can be a rewarding thing to do where you get to help your son, daughter, brother, sister, parents, or other immediate family member the chance of being a homeowner. Although there are risks involved if the main borrower is late on their mortgage payment or defaults on their mortgage loan, the rewards are priceless. Most co-signers do not stay co-signers long because the main borrower normally refinance the co-signer names out after a few years or they sell their homes.