Some people think that getting a cosigner on a mortgage loan is a cure-all, and will automatically make someone qualify for the loan they seek. This is not so.
First, the cosigners will need to be scrutinized for their own income and debt load, and the qualifying numbers and debt ratios will still need to make sense. For example, if you have a cosigner that has a large mortgage of their own, two car loans, credit card debt, and student loans, I would doubt that their income is going to help in any cosigning situation. In other words, people seem to think that a cosigning obligation stops at just putting their name on some documents. The actuality is that when you cosign a loan the bank and underwriter will take into account all of your financial information, and expect you to make payments if the primary occupants that needs cosigning help cannot.
I wrote a blog about the pros and cons of cosigning a loan. As long as the primary occupants makes their mortgage payments, it is not a hindrance at all to the cosigner.
Another important thing to note is that cosigning may not even be allowed on some loans, or may have a diminished benefit on others. For example, on an FHA loan a non-occupant cosigner is allowable. But on most conventional loans a non-occupant cosigner is either not allowed, or the bank will still require that the primary occupant qualifies for the bulk of the loan, allowing the non-occupant cosigner only to help qualify for a smaller part.
If you have a son or daughter who has minimal to no income, but you want to help them buy a home, with a conventional loan a non-occupant cosigner would usually not work in that situation. But it would on an FHA loan, as long as the debt ratios made sense when considering everyone's income and debts, even if the children had little to no income.
As with everything in the mortgage world, you need to speak to an experienced and qualified professional, before making any assumptions about writing an offer based on what you think you can qualify for in the way of a mortgage loan.
Tags: cosigner, underwriting
