Boston Property Management: Co-signing a Mortgage
Sometimes you need a co-signer just so that you can buy a home. Buying a home is quite important but not everyone is able to afford it. This is where the co-signer comes in to play as it makes the job much easier.
This is a scenario where young people are starting off in their careers and need the help of siblings or parents to get the home they need. This could also be the case for divorcees to buy a new home. In other cases it could be for those who are going back to full time education and need help. The last scenario is the one where self-employed people need to get a co-signer as their income isn’t enough to qualify.
You also need to inform your co-signer about all the scenarios which can play out and keep them in the loop. They also need to know whether the co-signer will have an ownership in the home or whether they will be expected to make any contributions.
Boston Property Management: Co-signer types
There are two types of co-signers, where the first one will live in the home while the latter will just be co-borrowers and non-occupant. If there is an occupant co-borrower, then the lenders will do their due diligence and check the value and location of the current home. They also conduct occupancy checks to ensure that the co-occupants have moved into the new home.
Ownership considerations for co-signers
Lenders are strict and will ensure that all co-signers have to be listed as owners. Even if the borrowers are joint tenants, they will have equal shares within the property. In the event that they take the title as tenants in common, then they can both define their ownership within the property. They can however allow the borrowers to take different shares as both are liable for the loan. So if one of the borrowers is late with paying off the loan then it will hurt the credit of both the borrowers. It will affect them from getting loans in the future. The co-signer can prevent this from happening in the future if there is documentation to prove that the co-borrower is making mortgage payments on time and has no history of late payments.
Lender requirements for co-signers
The co-borrowers need to get everything right when they use a co-signer as not all lenders are flexible. Fannie Mae and Freddie Mac allow the DTI to be calculated by mixing up the incomes of both the occupant and non-occupant co-borrowers. The down payment has to be at five percent to allow a co-signer while those with less than 20 will require at least five percent from the occupant co-borrower.If it is a jumbo loan above $417,000 then you might still be allowed to have a blended ratio with your co-signer.
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