“My mom makes $200,000 per year and is willing to co-sign for my loan, so I should qualify easily…”
We hear that comment often from borrowers who are having trouble qualifying for a mortgage on their own.
BUT, they are often mistaken because they are unaware that mom has a $1,100 car payment, a $6,300 mortgage payment, and a $300 per month credit card payment.
So, mom barely qualifies for her own loan, let alone her son’s.
Co-Borrowers Are A Great Way To Help Young Borrowers Qualify For A Mortgage
This is a quick reminder that finding a willing co-signer (aka “non-occupant co-borrower”) is a great way for young borrowers to get help qualifying for a loan. This is particularly the case when young borrowers expect their income to increase in the near future or when their tax returns do not reflect their actual cash flow (like with most self-employed borrowers).
“Non-occupant” refers to the fact that a co-signing borrower can sign for a mortgage but not have to live in the mortgaged property, even if the mortgage involves more favorable “owner-occupied” financing. FHA, Fannie Mae, and Freddie Mac all allow non-occupant co-borrowers to co-sign for an owner-occupied mortgage.
Borrowers, however, need to remember that lenders need to take into account ALL of the non-occupant co-borrower’s existing debts along with the new debt for which the non-occupant co-borrower is co-signing.
And – it is often the case where co-signers do not have enough income to co-sign simply because their own debt obligations are too high.
