Does Co-Signing Affect In Buying Home In The Future
This BLOG On Does Co-Signing Affect In Buying Home In The Future Was UPDATED On January 20th, 2019
Does Co-Signing Affect In Buying Home In The Future for the person that has co-signed?
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.
- Those who have co-signed for anyone, the monthly payment is reflected on credit report
- It will count against debt to income ratios when calculating for debt to income ratios during the first year
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,
- HUD allows borrowers to have non-occupied co-signers who are family members to qualify for income
- HUD allows for more than one non-occupant co-borrowers to be added to FHA Loans
- Many potential family members who are asked to co-sign are reluctant to do so
- Main reason for the reluctance is that 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 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 lender with proof of 12 month’s cancelled checks and/or bank statements
- By proving that, it documents they are not responsible for the mortgage payments
- Once the lender sees proof, then the monthly mortgage payments are exempt from their debt to income calculations
- They are set to go ahead and proceed with their new mortgage loan in the future
Risks With Being Non-Occupant Co-Borrowers
There are risks with being a non-occupant co-borrowers
- If someone is a co-signer for someone else, they will be taking on the risk of having their credit potentially damaged if the main borrower is late on their monthly payments or if they default on their loan obligations
- If the main borrower defaults on their mortgage obligations, the creditor can come after the co-borrower for payment
What Information Is Needed By Co-Borrowers?
If someone is planning in being a non-occupant co-borrower, the same process is required.
They need to complete and provide the following:
- Complete the 4 page mortgage loan application (1003)
- Have their credit ran
- Provide Documents Required To Process Mortgage Loan
- Sign closing mortgage documents
Does Co-Signing Affect In Buying Home In Future For Co-Borrowers?
Does Co-Signing Affect In Buying Home? The answer is yes if the co-borrower is planning in purchasing a home in the next 12 months. The answer to the question Does Co-Signing Affect In Buying Home is NO. This holds true if the co-borrower is planning on purchasing a home after 12 months. Being co-signer for someone and that person has made timely payments for at least twelve months by bank checks will exclude the mortgage payment of main borrower from DTI Calculations. This holds true as long as they can provide co-borrower with 12 months cancelled checks and/or bank statements. If this can be provided, co-borrowers can exclude that monthly payment obligation from debt to income calculations when applying for a mortgage loan in the future:
- It needs to be proven only by cancelled checks and/or bank statements
- Cash monthly payments do not count even though the main borrower may have paid receipts
Many home buyers are reluctant in asking family member to be their non-occupant co-borrowers and often do not want to ask. However, many family member are more than happy to help their loved ones realize the dream of home ownership by becoming their non-occupant co-borrowers.
Can Borrower Refinance Non-Occupant Co-Borrowers Out?
Main reason for borrowers to add non-occupant co-borrowers is due to the fact that they do not qualify by themselves due to not enough income.
- There are many instances where borrowers debt to income ratios exceed the maximum allowed by FHA
- There are instances where main borrowers has overtime income, part time income, second jobs, and/or self employment income that cannot count when qualifying for mortgage due to not being seasoned for two years
- Any other income such as part time income, second jobs, or self employment income needs a two year seasoning to be able to be used as qualified income by lenders
- On cases where other income cannot be used, borrowers can add non-occupant co-borrowers to the loan
- Once the seasoning requirements is reached, the main borrower can refinance their loan and take out the non-occupant co-borrowers
Home Buyers who have higher debt to income ratios and need to qualify with a direct lender with no mortgage overlays on government and/or conventional loans can contact us at 262-716-8151 or text us for faster response. Or email us at firstname.lastname@example.org. We are available 7 days a week, evenings, weekends, and holidays.