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Mortgage Cosigner

Mark Cappel
UpdatedSep 21, 2023
Key Takeaways:
  • The FHA requires cosigners to be related by blood or marriage. Assuming your cosigner will not occupy the house with you, the cosigner will become a non-occupying co-borrower. The lender will use the cosigner's credit score to help you qualify.
My mom has excellent credit, but does not earn much more than me. Can she qualify as a mortgage cosigner?

The banker told us that right now the rules are for FHA requirements that you can have someone that is not blood, but they must be related somehow legally, since my finance and I are not legally married yet they will not let my soon to be mother in law co sign for me. Now from what the banker says is that I don't qualify on my own and he has yet to tell me the answer on why , but my mom is willing to do it. My question is, is if she does not make that much more than me why does he think that I will qualify with her, since I couldn't do it on my own? I know that she has excellent credit, but her income is only about $2,000 more than me?

A mortgage cosigner guarantees payment in case the primary borrower defaults. As such, the cosigner assumes considerable liability. If a person agrees to be a cosigner, he or she should make an agreement with the primary borrower that when the primary borrower's financial picture and credit score improves, the primary borrower will refinance the mortgage (or any loan for that matter) to remove the cosigner.

If you are asked to cosign any loan, step back and review the entire situation. Consigning is not an idle gesture -- it commits you to considerable risk. The lender asked the borrower to find a cosigner because the borrower has either no credit history or one that is disconcerting. If you have questions about your potential liabilities, consult with an attorney in your state.

Qualifying for a mortgage with a cosigner

The FHA requires cosigners to be related by blood or marriage. Assuming your cosigner will not occupy the house with you, the cosigner will become a non-occupying co-borrower. In this case, the lender will use the cosigner's credit score to help you qualify.

However, you as the primary borrower must be able to qualify with your debt-to-income ratio. In other words, your income alone must be enough to cover the payment -- your lender will generally require that the mortgage payment, including taxes and insurance be no more than 33% of your gross income. If you can qualify with your income, then it will be beneficial to have a cosigner on the mortgage with the cosigner's higher credit score.

Qualifying for a mortgage

A mortgage lender wants three things from a potential customer: Steady income, a relatively clean recent credit history, and a debt-to-income ratio of 35% or less. Customers who qualify for a mortgage have all three of these qualities, plus a down-payment.

Start with Mortgage Basics to Know Before You Apply for a Loan. Next, I recommend you download a Uniform Residential Loan Application (Form 1003), complete it, and resume your mortgage shopping. Then, go to the Bills.com mortgage saving center for no-cost, pre-screened quotes from mortgage lenders.

Credit Report

Next, go to AnnualCreditReport.com to get a no-cost, no-obligation copy of your credit report from each of the three major consumer credit reporting companies (commonly called "credit bureaus"). Review your report and dispute any inaccurate listings.

To find out more how your credit score is calculated I recommend you read an article I wrote explaining FICO Score Calculation. This should give you a much clearer understanding of how credit scores work.

Debt-to-Income Ratio

Finally, lenders calculate and analyze your debt-to-income ratio to determine the size of mortgage you can afford. See DTI: Debt-to-Income Ratio Information to learn how to calculate your debt-to-income ratio.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

The mortgage market: what's new?

It is expected that mortgage rates are subject to change. Homebuyers and those refinancing their mortgages should pay close attention to the latest mortgage rate

Mortgage rates August 24, 2023
According to Freddie Mac, the 30-year mortgage rate for the week of August 24, 2023 stands at 7.23%. This 14 basis points increase from the previous week's rate.
Additionally, Freddie Mac reports that the 15-year mortgage rate for August 24, 2023 is 6.55%, indicating a 9 basis points increase from previous week’s rates.
Note: A basis point is equal to one-hundredth of one percent (0.01%). In numerical terms, if the mortgage rate changes by 20 basis points, it means the rate has changed by 0.20%.

Understanding the impact of mortgage rates on your finances
When it comes to determining your monthly payment, mortgage rates are a key factor to consider. Here are the avergage interest rates (APR) for August 17, 2023 based on Zillow data for borrowers with a high credit score (680-740) in the United States:

  • 30-year conventional loan is 7.26%
  • 15-year conventional loan is 6.36%
    Based on the provided rates, a $279,082 30-year mortgage would result in a monthly payment of $1,906. Alternatively, a 15-year mortgage would require a monthly payment of around $2,410.

Experience a smooth mortgage process: Shop around and get pre-approved today!
Shopping around for mortgages and getting pre-approved can make your home-buying or refinancing process easier. Ready to take the plunge? Check Out mortgage rates now for the best options available.

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2 Comments

AAndrea Beasley, Jan, 2020

The credit union refinanced a mortgage made to my husband three times in 9 years with no mention of me until adding me to the note only. No title nor security instrument lists me. I have no ownership just the debt to our home. Am I a co signor with no rights? This is in Indiana.

DDaniel Cohen, Jan, 2020

Andrea, I am not a lawyer so please do not consider my reply legal advice.

It is not clear to me what you mean that they added you to the note. Your phrasing makes it sound like you were not involved in the process. Did you sign loan documents taking financial responsibility? If so, then I believe that you could do so without being listed on the title. That would leave you financially responsible for the debt but without ownership rights. 

Go speak with an attorney to review the full facts of the matter, especially if you are concerned about the financial responsibility aspect.