Obtaining a mortgage can be a significant financial decision, and not everyone can qualify for the best terms due to their income and credit standing. However, if you can get a co-signer for your mortgage, you can use their resources to strengthen your application.
This article will cover what you need to know whether you’re the co-signer or looking for someone to co-sign a mortgage.
What It Means To Be A Co-Signer For A House
When you co-sign a mortgage, you consent to assume financial responsibility for the mortgage in the event that the primary borrower is unable to continue making the required payments on a regular basis.
It’s helpful to comprehend some of the reasons someone might ask you to co-sign on a mortgage for them if they’re looking to buy a home or refinance their current one.
See What You Qualify For
Your Credit Profile Excellent 720+ Good 660-719 Avg. 620-659 Below Avg. 580-619 Poor ≤ 579.
When do you intend to sign a purchase agreement? Offer pending/found a house? Buying in 30 days? Buying in 2 to 3 months? Buying in 4 to 5 months? Buying in 6+ months? Researching options?
Do you have a second mortgage?
Are you a first time homebuyer?
Congratulations! You are qualified to continue your home loan application with Rocket Mortgage online based on the information you have provided.
If a sign-in page does not automatically pop up in a new tab, click here
Who Can Co-Sign For A Mortgage?
Typically, a parent, spouse, friend, or family member will co-sign for a mortgage.
Theoretically, there aren’t many restrictions on who can co-sign with or for someone as long as you can meet the financial requirements. However, for some loans, including some mortgages, lenders want to know that the co-signers are closely related so that they have an incentive to assist you in obtaining the property.
According to this reasoning, family members may occasionally be willing to assist you when others wouldn’t, including with your mortgage payment. If a family member co-signs the mortgage, some mortgage investors, such as the Federal Housing Administration (FHA), will permit you to qualify as an occupant with a higher debt-to-income (DTI) ratio and pay a lower down payment. Before making a decision, be sure to consult a home loan expert because not all investors are concerned with the co-signer’s connection to the buyer.
A co-signer, unlike a co-borrower, is not an owner of the property secured by the mortgage. The co-signer does not reside in the same household as the primary borrower because they are non-occupants. Should the borrower fail to make mortgage payments or default on the loan, the co-signer will be financially responsible for the mortgage.
Co-signing is a big responsibility, but it can really help someone out. When you co-sign for someone, you’re securing the loan with your own name and credit. Even if you feel confident in the person you’re co-signing for and have faith in them to keep their end of the bargain, you should consider how you can protect yourself in the event that they begin to fall behind on payments.
Some ways you can protect yourself can include:
The Benefits Of Co-Signing For A House
It may be the only way a borrower can be approved for or afford a loan if they apply with a co-signer. A borrower may gain from having a co-signer on a mortgage in a number of significant ways, including the following:
The primary borrower may be eligible for a larger loan amount than they could on their own because a lender takes into account both their credit and income.
Apply for a mortgage today! Apply online for expert recommendations with real interest rates and payments.
Having or being a co-signer can have its drawbacks too. Consider the following risks involved in a co-signed mortgage loan.
Let’s imagine that you are looking to apply for a mortgage and that you have found a co-signer who is willing to give you a little extra help to qualify. There are some restrictions even though applying for a mortgage with a co-signer who isn’t living there is certainly possible.
Depending on the type of loan you’re applying for, you may or may not be able to submit an application with a co-signer. Conventional loans and FHA loans are the most common types of loans with non-occupant co-borrowers.
The co-signer does not have to be on the property’s title in order to apply for a conventional loan with a non-occupant co-borrower; they simply need to sign the loan. To determine loan eligibility, the co-borrowers’ credit will be checked, and the score will be used in conjunction with the occupying client.
When examining DTI for conventional loans, things start to diverge depending on who owns the loan.
Different lenders have different policies for the occupying client’s DTI. Speak with a Home Loan Expert to discuss your situation.
The housing expense-to-income ratio (HTI) is increased by the income and debts of non-occupying co-signers. The percentage of a client’s monthly income that goes toward housing costs, including principal, interest, taxes, and insurance, is known as their HTI. This also sometimes includes homeowners association (HOA) fees. The acronym PITIA stands for these five components of a mortgage payment when combined.
There are a few additional unique restrictions if you want to apply for an FHA loan with a co-signer who is not an owner-occupant.
First, you can have a maximum of two non-occupying co-clients. Their primary residence needs to be in the U. S. Additionally, FHA loans require non-occupant co-signers to be listed on both the mortgage and the title.
If you want to benefit fully from the FHA program and only bring a 3 5% down payment required at closing, plus a few more rules
The property youre buying must be a single-family residence. The non-occupant co-borrower must be a relative as well. If you write a letter to your lender outlining the relationship and circumstances, they might take into account a close friend.
The following are regarded as relatives for mortgage purposes:
You must have a down payment or equity stake of at least 25% in the following situations:
FAQs About Co-Signing For A House
A co-signer has the option to request a release from the loan’s obligations.
It is customary for the person occupying the property to approve this, but there may be an exception. Consider creating a contract with the homeowner that grants you the right to ask to be removed from the loan in exchange for co-signing if they fail to make payments.
However, the lender must first approve your discharge from the loan. A lender is unlikely to drop a co-signer from the mortgage if the occupant has already fallen behind on payments.
Can I co-sign a mortgage if I already have one?
You can co-sign for another mortgage even if you already have one. However, make sure your finances can support both monthly payments in the event the primary borrower falls behind.
How long is a co-signer responsible for a mortgage?
When you co-sign for a mortgage, you are responsible for the loan’s entire term. As mentioned above, there are circumstances in which you can withdraw from a co-signed mortgage.
If you have a higher level of debt or a history of credit problems, having a co-signer can be very beneficial. However, it’s crucial that both the co-signer and the occupant understand what they’re signing.
An equal share of the responsibility for the loan is assumed by the co-signer because they are risking their good credit to help someone qualify. These events appear on the co-signer’s record as well if the homeowner defaults on the loan or is foreclosed.
If you’re looking to finance a home purchase, with or without a co-signer, you can apply online today with Rocket Mortgage and see what your rates might be.
Apply for a mortgage today! Apply online for expert recommendations with real interest rates and payments.
Victoria Araj has worked for Rocket Mortgage for more than 15 years and has held positions in mortgage banking, public relations, and other areas. She graduated from Michigan State University with a bachelor’s in journalism with a political science emphasis and the University of Michigan with a master’s in public administration.
Learn About Quicken Loans
FAQ
What are the requirements to be a co-signer on a mortgage?
The same information required when you apply for a loan must be included on any financial documents you submit to prove your eligibility as a cosigner. This may include: Income verification. You might be asked to submit tax returns, pay stubs, W2 forms, or other paperwork.
Is it OK to cosign for a mortgage?
Co-signing a loan is a legally binding agreement, not just a good character reference. This means that if the primary signer of the mortgage defaults and you are a co-signer, the lender may pursue payment from you.
What credit score do you need to cosign a mortgage?
A cosigner will typically need credit that is in the very good or exceptional range—670 or higher—even though there may not be a minimum credit score required. Although each lender will have its own requirements, a cosigner is typically eligible with a credit score in that range.
Can you get denied a mortgage with a cosigner?
The lender will reject the loan application if you or your co-signer’s credit score falls below the minimum standards set by the lender. If you and your co-signers have very different credit scores, the lender will base its decisions on the loan with the lowest credit score.