Will Your Chicagoland Mortgage
Co-Signor Deliver Magic?
More and more often, the topic of co-signing on a Mortgage is being brought up both during initial inquiries and Pre-Qualification conversations ...
I'm being presented with questions regarding Mortgage co-signing from both hopeful recipients of the co-signing and those actually considering becoming a co-signor. There is often confusion surrounding this topic. (Some simply have co-signing confused with co-borrowing. They are two different things.)
And many times, recipient and co-signor alike are unsure of the true benefits and responsibilities attached to the act of co-signing. (For a prior post on the topic of parents considering co-signing, click HERE.)
Co-signing is being considered in a growing number of scenarios. The situations I see most often surround:
- Hopeful Home Buyers with low *Credit Scores or Credit Scores low enough that the hopeful Buyers are unable to be approved for financing on their own merit.
- Young Home Buyers that have not yet established enough credit history. (*Contact me for info on credit score guidelines/mortgage program availability.)
It's quite common to hear my mortgage applicants liken a co-signor to a magician. They think the co-signor's good credit is going to deliver a Mortgage Approval for them something like a magician delivers a rabbit out of a hat.
"Wa-La!" Approval!
They also often believe that a willing co-signor with good credit will balance out their bad credit on their Mortgage Application.
Unfortunately, it doesn't work like that when applying for mortgage loans. Regardless of job history, income, or down payment ability, anyone and everyone applying for the Mortgage must credit qualify to be on that Mortgage. The rules are firm and clear on that.
So ...
- What does this ultimately mean to you as a Mortgage Applicant when this problem scenario arises?
- What options are still open for consideration should you hope to proceed with buying a home?
Much depends on your credit and financial situation. Options can exist though.
One possible solution can be that your co-signor becomes the sole buyer of the home considered for purchase. Your co-signor seeks a mortgage on their own.
When your co-signor makes application for their mortgage, the property is then considered an "investment" property (when they are a non-occupant). As an investor seeking financing, they'll be required to place a larger down payment on the purchase.
In most cases, the down payment will be at least 15%. They'll be required to qualify for a mortgage on their own financial merits and credit scores. (Note: Interest Rates on investment property financing are typically higher than those for buyer-occupied properties.)
Should your co-signor agree to move ahead with this purchase/investment, you (the initial Buyer) become the "renter". Most likely you'll then pay the co-signor's incurred mortgage payments via your "rent" payments to them each month.
What I've found is that many times written agreements are put into place between co-signor/investor and the initial Buyer during these types of scenarios. And the co-signor's financing is viewed as only temporary while the renter/initial Buyer works on improving or building their credit scores.
When the credit is improved (or has grown) sufficiently to the point where a mortgage can be successfully obtained on their own, the home is then bought the co-signing investor ... or the home is Refinanced into both party's names.
The bottomline is: No two purchase scenarios, co-signing, or financing scenarios are the same. Take the time to consult an experienced and knowledgeable Mortgage Lender regarding your buying and financing needs.
Take this action well prior to starting your home search. That will allow you ample time to grow your credit history, correct, repair, or investigate all the financial options open to you for purchase.
Will Your Chicagoland Mortgage Co-Signor Deliver Magic? Scrambling to find a willing and capable co-signor after you have found the home of your dreams is extremely stressful.
Don't place yourself in that position. Contact me now to discover all the buying and financing options available to you.
* Hoping to Buy a Home or Refinance a home or investment property in New Lenox or elsewhere in Chicagoland - IL or WI?
Contact me! I'll put my 40 years of mortgage experience and expertise hard to work on your behalf.
I'm easily found at:
Gene Mundt
Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI Lic. #216987
Direct: 815.524.2280
Cell/Text: 708.921.6331
eFax: 815.524.2281
*
I try to answer or communicate with each client and Referral Partner as
quickly as possible upon receiving a call, email, or contact. Should
you not receive a timely response, please ... know that I am with
another client or within a Closing at the time. Please ... try again or
through another manner. Your business is very important to me. Thank
you!
- See more at: http://activerain.com/blogs/genemundt#sthash.9DVq3wmI.dpuf
*
I try to answer or communicate with each client and Referral Partner as
quickly as possible upon receiving a call, email, or contact. Should
you not receive a timely response, please ... know that I am with
another client or within a Closing at the time. Please ... try again or
through another manner. Your business is very important to me. Thank
you!
- See more at: http://activerain.com/blogs/genemundt#sthash.9DVq3wmI.dpuf
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, #Channahon,
#Romeoville, #Elwood, #Lockport, #Naperville, #Wilmington, #Peotone, etc.),
#DuPage County, the City of #Chicago, #Cook County, and elsewhere within IL & Wisconsin.
Your Referrals & Testimonials are Always Greatly Appreciated!
At this writing, we can only hope that business can continue as normal (or as close to normal as possible) pending the results of the congressional budget negotiations. It is now being reported that FHA can operate for a short period of time (even in the event that there is a government shutdown). 
