Considering Helping Your Child Buy a Home in
Will County or Chicagoland?
Will County or Chicagoland?
What Parents and/or Co-Signors Need to Know
Within the current housing market, there is great opportunity to be found, especially for First-Time Home Buyers. The cost of borrowing, in regards to Interest Rates, has remained fairly steady.
With all the positive opportunities that exist, many Home Buyers, along with their families, are looking to take advantage of the current positives by buying properties with the assistance of Co-Buyers/Co-Signors. Most considering this path to home ownership are parents and/or relatives.
As a Mortgage Originator, it's not uncommon for me to receive questions regarding this method of Home Buying. "Co-Signing" is happening more and more frequently, especially with young First-Time Home Buyers. In Mortgage terms, this method of buying/borrowing is called being a "Co-Mortgagor" ... a fancy term for "another borrower".
This practice is typically utilized when the "non-occupying" Co-Borrower (let's just say a parent) is the stronger applicant on a Mortgage ... and his/her income, Credit, and assets make for an "approvable" loan when the "main borrower/buyer" is not able to qualify for a Mortgage on their own.
Put another way, the child in this scenario is buying their first home, often has adequate Credit, but lacks the job history or income to qualify on their own.
Considering the (child's) parent's income, Credit, and debt makes the loan approvable because the parents' "vitals" help the numbers. That means the debt-to-income ratios needed to reach the approval level are available.
With FHA, the down payment requirement is only 3.5%, and the Borrower (who MUST occupy the purchase residence) gets as good of Interest Rate as if they had borrowed on the mortgage alone.
Obviously, this is great for the son/daughter, but what about the "Co-Signor, Co-Mortgagor, Parent" involved?
Fact is: The Co-Signor will share the same debt and note responsibility as the main applicant. That debt and responsibility will appear on their Credit Report as their mortgage obligation.
If the child misses a payment, the parents (Co-Signors/Co-Mortgagors) Credit Report will show as having a late payment. A very valid reason for all parties involved to give this great consideration prior to agreeing to start the mortgage process.
Consider this though ...
Co-Signors/Co-Mortgagors (in my most recent Co-Signor/Co-Mortgagor case) were considering buying a home on their child's behalf because they didn't think the child could qualify on their own.
These parents were fully-prepared to put forward a 20-25% down payment, purchase the home in their own names, and then move the child in as a tenant. The ability to become Co-Signors/Co-Mortgagors changed the financial scenario they received significantly for them and their child.
How did it change? And what are the differences to be found between the two methods of home buying?
The biggest difference is how the bank perceived their upcoming ownership. Parents that just buy a property outright and rent it to their child are considered investors by the bank lending money.
Investors pay higher interest rates to borrow money (typically a minimum of 3/4%) ... and/or their Closing Costs rise several thousand dollars.
Why? Because the bank considers this type of loan a higher RISK because of the "occupancy" status of the property.
Now you know a bit about the ins-and-outs of Co-Signing/Co-Mortgaging. But if you're a parent, or someone considering Co-Signing/Co-Mortgaging, you're going to need to know ...
- Where to start the financing process
- How to start the process
- What financial documentation will be expected from you
- What funds will be subject to verification
Much of the process of mortgage financing will be the same for Co-Signors/Co-Mortgagors as for the actual resident(s) of the property.
A handy list of those financial documents needed for mortgage application can be found via my website, by clicking ... "HERE".
What is probably the most common concern or question I hear from Co-Signors/Co-Mortgagors (parents), is ... "How has the mortgage process changed since I last participated in it"?
There's no denying the truth. For a great many parents the mortgage process will be unrecognizable from their own prior financing experiences. And admittedly, the requests for documentation and verification could seem a bit overwhelming.
But documentation and verification is what is required to move the modern Mortgage Process along to successful completion. Underwriters and end-lenders will not be deterred from it.
Co-Signors/Co-Mortgagors must be prepared to have monies/accounts/down payments verified, along with their employment, credit/debt, and more, just as their child will.
Now more than ever, the mortgage process itself is specific to those borrowers taking part in it ... so individual and personalized instructions regarding your financial scenario will be provided by your Mortgage Originator. Listen. Learn. Comply.
If you do so, those requests are completed in a timely fashion, and the Originator's instructions are followed, Co-Signors/Co-Mortgagors can help their child successfully establish credit, obtain historically low Interest Rates, and buy a home at very friendly housing prices.
Should this be a financial step you are considering within your own family ... contact me, to obtain information specific to your needs.
Becoming a Co-Signor/Co-Mortgagor for your child could be the gift that sets them down the path to a healthy financial future ...
* For personalized Mortgage info and service regarding your family's Co-Signor/Co-Mortgagor options in New Lenox or elsewhere in the Chicagoland area, please contact me. I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf.
I can be easily found at:
Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI Licensed
American Portfolio Mortgage Corp.
Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking: Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including: The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL.
Referrals are Greatly Appreciated!