How Does Co-Signing Affect My Ability To Qualify For A Mortgage Loan?

If you can find a cosigner for your mortgage, come programs include FHA loans and conventional mortgages, you could potentially qualify for a larger purchase price by taking on larger payment on a monthly basis. The other person has to provide a letter of explanation to the lender explaining specifically why they are willing to cosign for you to take on a larger mortgage.

Few things to be mindful of:

  • You’re ability to make timely mortgage payments is crucial as it becomes the potential problem of the cosigner in the event you skip a payment or for whatever reason are unable to make the payment worked the payment becomes late etc. In other words the other person’s credit is negatively affected in the event the payment is not made. This other person is literally 50% responsible for the obligation even though you are the one making the payment.
  • Cosigning does not always benefit you especially if the other person does not have any additional income to help you increase borrowing power to offset the liabilities associated with taking out the new home. For example of first-time home buyer wants to have his grandmother cosign to help him purchase a home, unfortunately because grandma is retired and is only on Social Security income while she might be able to get additional money for a down payment having her on the loan as a cosigner probably wouldn’t help us for is providing additional income to offset the housing payment liability.
  • Your choices shape someone else’s chances-let’s say you’re cosigner wants to purchase a house down the road themselves. You make the mortgage payment on your home that they’ve cosign for you years earlier. You will have to refinance that person off the loan so they can qualify for a loan themselves which basically means you should keep your credit in pristine condition because otherwise your choices subsequently prevent your cosigner from being able to qualify for something themselves when they did you favor in the first place by cosigning on your mortgage.

If the cosigner in you are in full agreement that they will cosign for you to help you take on a larger monthly mortgage payment, then the rewards of purchasing a higher priced home are certainly within your grasp. The cosigner will certainly have to qualify with full income including providing tax returns, W-2s and  pay stubs as well as have acceptable credit it reaches 620 credit score or better, hopefully better and of course funds available for reserves. Cosigning can certainly bridge the gap between qualifying and subsequently not qualifying for loan, the cosigner doesn’t even have to live with the property or purchasing, but they have to be in full agreement and provide all of the financial documentation that you would put a letter to consider them as a worthy co-applicant.

If you are in a cosigner situation, or are trying to get out of a cosigner situation and looking to take out a new loan or see what having a new loan could do for you, contact Scott.Sheldon@nafinc.com today!

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