THIS IS A RE-BLOG FROM LARRY BETTAG, a midwest lender...REALLY GOOD INFORMATION
If you are looking for the straight scoop in the mid-west, Larry is your guy!
Please note: If you are considering acting as a co-borrower it will be VERY important that you have full confidence that the mortgage payment will be made on time, EVERY time. It is in a co-borrower's best interest to monitor the payments. A great credit score will drop dramatically when a payment is late or not made. Acting as a co-borrower, your credit score will be affected by the positive or negative mortgage payment history of the primary borrower's. This is a big decision and not one to be made lightly. We recently got a call from gentleman (Mr. B) who is desparately trying to save a home he co-signed for his nephew. The nephew stopped making payments, and didn't inform his uncle. Mr. B didn't even know there was a problem until he applied for credit and was denied! His credit score had been in the upper 700's!
Bridget "Maryland Mortgage Mama" McGee
Co-Borrowers are borrowers that sign in order to help the main or primary borrower qualify for a loan.
The big hub bub in mortgage banking recently has revolved around Non - Occupant Co-Borrowers. Non-Occupant Co-Borrowers are borrowers who will help the borrower guarantee the loan's performance, but Non - Occupant won't live in the property. There are things that you need to know about Non-Occupant Co-Borrowers.
1) DOWN PAYMENTS
First with Fannie and Freddie lenders require 10 percent down payment with at least 5% being the borrowers own money. FHA doesn't really care about how much money comes from gift, borrower, co-borrower or non-occupant co-borrower so long as the minimum down payment is met. For a single family residence, 3.5% is the rule for FHA. HOWEVER, on a two unit purchase, the FHA borrower needs 25% if they're using a non-occupant co-borrower...DON'T GET FOOLED. The rules are so specific and they morph and change all the time!!!! www.househomeinfo.com/images/j0409141.jpg
Fannie and Freddie are different than FHA in a very strict fashion. Here's the gig:
Fannie/Freddie - generally the borrower still needs to earn enough income that his ratios don't exceed 38 for the housing ratio and 43 for the total debt ratio. This isn't hard and fast because ultimately AUS or automated underwriting systems will determine this....but as a general rule you need to be aware that the borrower needs to have some real capacity to pay back the loan with minimum reliance on the non-occupant co-borrower;
FHA - The borrower can have ratios of 1,000,000 over 1,000,000 so long as between borrower and non-occupant co-borrower you get fairly close to the 29 and 41 ratios that FHA requires. This is AWESOME for dad's who want to co-sign for their kids while they're making no money going to college. I do that all the time for parents and kids out a Northern Illinois University. The kid makes squat-ola as a college student, but the parents have sufficient income to qualify.
3) BUT THE NON-OCCUPANT CO-BORROWER MAY WANT TO BUY A HOME FOR THEMSELVES LATER!!!!
Non-Occupant Co-Borrowers can still apply for a mortgage on their own in order to buy a home. A fear exists that if I co-sign, I won't be able to buy a home later because I have a mortgage reporting on a credit report. NOT TRUE! So long as the occupant can demonstrate that they've been paying the mortgage on time, most lenders will take the last 6-12 month's cancelled checks to show that the borrower has been making those payments. If so, and the payments have been made on time, the non-occupant co-borrower is still able to buy another property without having that loan count against him or her in their quest for a new purchase!
Now's the time to consider buying a home, but just because you may not qualify on your own, wellllllllllll, let's just say that there are still viable alternatives out there
If you are considering purchasing a home in Maryland and want to be sure you are mortgage ready, my brother Tony and I will be happy to help! We help to make the mortgage process a pleasure!
If you already own your home, we are happy to provide a no-cost mortgage review to help you to determine if refinancing may be in your best interest. Please contact me at 410-960-2061.