Can I Have A Co-Signer For My Mortgage Loan?Like credit cards or car loans, some mortgages allow borrowers to have co-signers on the loan with them, enhancing their loan application.

However, a co-signer on a mortgage loan doesn’t have the same impact that it might on another loan. Furthermore, it poses serious drawbacks for the co-signer.

What Is A Mortgage CoSigner?

A mortgage co-signer is a person that isn’t an owner-occupant of the house. However, the co-signer is on the hook for the loan.

Typically, a co-signer is a family member or close friend that wants to help the primary borrower qualify for a mortgage.

To that end, he signs the loan documents along with the primary borrower, taking full responsibility for them. 

When a co-signer applies for a mortgage, the lender considers the co-signer’s income and savings along with the borrower’s.

For instance, if a borrower only has $3,000 per month in income but wants to have a mortgage that, when added up with his other payments, works out to a total debt load of $1,800 per month, a lender might not be willing to make the loan.

If the borrower adds a co-signer with $3,000 per month in income and no debt, the lender looks at the $1,800 in payments against the combined income of $6,000, and is much more likely to approve it.

CoSigner Limitations

Co-signers can add income, but they can’t mitigate credit problems.

Typically, the lender will look at the least qualified borrower’s credit score when deciding whether or not to make the loan.

This means that a co-signer might not be able to help a borrower who has adequate income but doesn’t have adequate credit.

There Are Risks In CoSigning For A Mortgage

Co-signing arrangements carry risks for both the borrower and the co-signer.

The co-signer gets all of the downsides of debt without the benefits. He doesn’t get to use or own the house, but he’s responsible for it if the mortgage goes unpaid.

The co-signer’s credit could be ruined and he could be sued (in some states) if the borrower doesn’t pay and he doesn’t step in.

For the borrower, having a co-signer may an additional level of pressure to make payments since defaulting on the loan will hurt him and his co-signer.

3 Important Credit Considerations Before You Apply For A MortgageBefore applying for a mortgage, borrowers need to build a plan for how they are going to manage their credit both going into the mortgage process and as they navigate through it.

Lenders like to know that borrowers have a strong likelihood of repaying the loans they take out and, as such, look carefully at an applicant’s credit.

Here are three must-dos that can help an applicant turn into a home owner.

PreChecking Credit Reports

Before even starting the home loan application process, borrowers are well served to check their own credit reports and see what appears. If everything is correct, their credit score can help them understand what type of loans are open to them and what they might cost.

When errors come up, pre-checking gives the applicant time to have the errors corrected before applying for a loan.

When an applicant has credit issues, knowing gives him time to fix them. He can pay down balances, add new lines to his report or take other action in advance of applying.

Manage The Debt To Income Ratio

Mortgage lenders calculate a borrower’s ability to borrow based on the debt-to-income ratio. They add up the proposed mortgage payment and the other debt payments and divide them into his monthly gross income.

If he has too much debt or not enough income he won’t get the loan he wants.

To manage this, borrowers have two choices.

One is to earn more by taking on a second job. The other is to have lower payments.

Paying down credit cards can be a quick way to solve this problem.

Avoid Taking On New Debt

When an applicant takes on more debt while applying for a home loan, it can cause three problems:

  1. The inquiry can drop his credit score.
  2. The payments can change his DTI.
  3. The lender might not feel good about a borrower taking on more debt.

Getting a mortgage can be tough. The key is to understand what lenders want to see and give it to them.

If you need help understanding credit and how to prepare for your mortgage transaction, contact your trusted mortgage professional.

Face The Numbers, A Mortgage That Works For YouBefore taking out a mortgage to buy a home, it’s time to take a realistic survey of your finances so that you can determine your price range and what size of home you can comfortably afford.

Buying a home that suits your finances will mean that your mortgage payments will be easily within your budget and won’t cause you financial stress.

Stay In Your Price Range

Many people, when offered a large mortgage by the bank, are tempted to buy homes that are outside of their price range.

It’s easy to see why a larger property or a more luxurious home might be appealing, but by stretching too far beyond your means you are courting with disaster.

If your monthly mortgage rate just barely fits within your budget, without room for savings, retirement contributions, or to build up an emergency fund – it will only be a matter of time before things start to get tight.

What happens if you lose your job, or if your income decreases? If you are unable to meet your mortgage payments, it is easy to slip very quickly into debt or even bankruptcy. This is why it is so crucial to buy a home that fits your budget.

Here Are Some Questions To Ask Yourself For Figuring Out How Much Mortgage You Can Comfortably Afford:

  • Make a detailed budget that chronicles your monthly incomings and outgoings. How much money do you really have each month to work with?
  • What type of safety net do you have if something goes wrong, in terms of savings and family support?
  • How large of a down payment are you able to save up? At least 20% of the property cost is recommended, but more is always better.
  • How much outstanding debt do you have from your other lenders, such as your credit card debts, your bank loans, student loans, etc?
  • How stable is your income? Do you have a steady paycheck or are you self-employed with variable income?
  • Are you willing to change your lifestyle and lead a more frugal life to get the house you want? Is there anywhere you can cut expenses and spend more on your mortgage payment?
  • What will be the total of all of the costs associated with purchasing the home, including closing costs, inspections and other fees?
  • What are the costs associated with moving? Don’t forget to include the moving van, new appliances, hotel expenses, gas and meals out during the transition period.

Once you have asked yourself these questions and taken a close look at your budget, you will be able to determine realistically what you can afford when buying a home – so that you can find that dream home that meets your budget. For more helpful advice, contact your trusted mortgage professional.

Get The Lowdown On Private Mortgage InsuranceYou may have heard the term Private Mortgage Insurance when looking to finance real estate. What is PMI, and how do you know when you need to purchase it?

The answer can be hard to find among all the real estate jargon you’re hearing lately. Below is the short version of what you need to know.

What Is Private Mortgage Insurance?

PMI is an extra insurance required by some lenders to offset their risk of you defaulting on your home loan. When you put down less than 20 percent of the real estate’s value, your lender may tell you that you have to buy PMI.

It is usually added into your monthly mortgage payment until the equity in your real estate reaches 20 percent.

Under the current law, the PMI will be canceled automatically at 22 percent equity, if you are current on your payments. If you aren’t current, the lender does not have to cancel the insurance because the loan is high-risk.

After getting caught up on your payments, the PMI will be cancelled. Any money that you have overpaid must be refunded to you within 45 days.

What If Your Real Estate Increases In Value?

With a conventional loan, it may take as many as 15 years of a 30-year loan to pay down 20 percent. But, if property values in your area rise, you might be able to cancel the PMI sooner.

Some lenders may be willing to consider the new value of your home to determine the equity in your home. You may be responsible for any fees, like an appraisal, that occur.

You’ll have to weigh the costs of the appraisal against the savings of the PMI premium. In most cases, you’ll find that the added expense is worth it. Private mortgage insurance is a good thing if you can’t afford to pay 20 percent of the cost of your real estate as down payment.

Are you a first-time homebuyer? Now is the best time for you to make the investment. Call your trusted mortgage professional to find out why.

When Is It A Good Idea To Use A Home Equity Loan?A home equity loan is a type of loan that allows you to use the equity of your home as collateral. It is an option that home owners have available to them and that some people use to pay for major expenses such as home renovations, college education or medical bills.

These types of loans became popular in 1996 because they provided a way for consumers to circumvent their tax charges for that year, which eliminated the deductions on the interest for most consumer purchases.

It is a good idea to leverage your shelter for cash? What is a legitimate reason for taking out a home equity loan? It can be tempting to use the equity you have in your property to pay for expensive luxuries, but there are only a few things that you should be spending a home equity loan on.

Home Renovation Projects

Home renovations are a popular reason why people take out a home equity loan. This idea actually makes sense, because making improvements to the home can greatly improve its value.

The renovation could pay for itself and more, when it comes to increasing the value of the property.Of course, the value of the home is also dependent on other factors beside the renovation, so there are no guarantees.

Debt Consolidation

Another reason why people take out home equity loans is so that they can combine all of their bills and debts into one, such as the credit card debt, retail credit debt and more. This can be advantageous, because the interest rate on a home equity loan is a lot cheaper.

Having a single monthly bill rather than having to keep track of several debts can also make things a lot simpler and improve your monthly cash flow.

Investing In Your Kids

Many parents have chosen to use their home equity loans to fund their child’s university or college education. With the extremely high costs of post-secondary education these days, this option can make a lot of sense.

However, if you are just about to consider retirement when your kids are going to college, you might want to look for scholarships or student loans instead so that you don’t reduce the nest egg you planned to retire on.

These are just a few things for homeowners to consider when it comes to home equity loans. To learn more about owning a home, you can contact me your trusted mortgage professional.