Results Realty Buzz: My credit is not good - but my co-signers credit is excellent - Yippie, I can buy & use FHA loans

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My credit is not good - but my co-signers credit is excellent - Yippie, I can buy & use FHA loans

Rarely do I re-blog but Jeff has outdone himself with this post.  The rules keep changing and it is good to know what they are today.

FHA Loans - FHA Home Loans - FHA Mortgages


There will always be some sort of mortgage myth in our industry or a piece of information given by a loan officer that is misleading. What I am about to talk about is regarding FHA loans and a borrower using a co-signer to help them purchase their new home. We call this a non-occupant co-borrower type of loan.




Knowledge of FHA loans

Let's first talk about co-signers for mortgages, because this term is used loosely throughout the real estate industry. When doing a mortgage, a co-signer is much different than when buying a car. When buying a car, you can still have bad credit below normal standards and bring a co-signer into the mix to solidify the deal. On a mortgage, if the primary borrower doesn't fit the normal credit score requirements and or the credit criteria, then you can't use a co-signer to help you purchase or refinance. A co-signer is used only for the purposes of qualifying with more income. The main point, the good credit of a co-signer can't be to offset the bad credit of a primary borrower, it's not allowed.

Now, there is a difference between specific types of loan products when using a co-signer.  On a conventional loan, the primary borrower still needs to qualify with an income ratio, which is usually only about 6%-8% above the normal qualifying ratios of 28/36. In regards to an FHA mortgage, there is no minimum requirement. In many cases, the primary borrower wouldn't even need income, but this depends on the overall deal. As long as the primary borrower met the credit requirements and the credit scores. This kind of scenario is typically scene when doing a FHA kiddie condo loan, which can also be known as a FHA non-occupant co-borrower loan. This is when you have a college student buying a property and the parent(s) are co-signing. More details on FHA kiddie condo loans.




Summary : I had to bring this up because I just received a call from a borrower who has credit scores of 565 who was told by a large bank that they can't get a loan.  But if they get a co-signer with good credit, that they would be able to get a loan. Knowledge in regards to the basics of FHA loans is so important. To me, this is actually Mortgage 101.

In regards to the word co-signer, in the mortgage industry, this is referred to as a non-occupant co-borrower. As long as the person who is co-signing is a family member or a relative and they aren't living in the property. Hence why they are called a non-occupying co-borrower. And a FHA non occupant co borrower is much easier doing this with than a conventional loan. So it's a mortgage myth if one says that you can get a co-signer no matter how your credit is. Lastly, if the primary borrower has someone that will occupy the property with them and will be on the loan, they are known as a co-borrower.


 -- Update per Missy Caulk's comment # 8 - The co-signer, aka non-occupant co-borrower can have a primary home, even a home with a FHA mortgage on it. Meaning that the home does not have to be free and clear. It's considered a debt and is part of the qualifying ratios.







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Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc


Comment balloon 11 commentsMarchel Peterson • July 26 2010 06:44PM


Thanks for the Re-Blog Marchel. I missed it first time through. Great info to pass on.

Posted by Randy Ostrander, Real Estate Broker, Serving Big Rapids and West Central MI (Lake and Lodge Realty LLC ) about 10 years ago

Marchel...  thanks for reblogging this and for getting this information out there.  Good luck with your current borrower and please keep my posted on how it all works out.. if they use the other lender based on their issue about the bankruptcy and needing 3 years, not 2 years.  thanks

jeff belonger

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) about 10 years ago

Hi Marchel, thanks for re-blogging this! Great info and I  might have missed it the first time around. Hope you are having a great summer!

Posted by Russell Lewis, Broker,CLHMS,GRI (Realty Austin, Austin Texas Real Estate) about 10 years ago

Thanks for posting this Marchel.  Yet another example of a valuable post that I would have missed.

Posted by Mary Kay Hopkins, e-PRO,GRI,CRS (Mary Kay Hopkins, LLC e-PRO, GRI, CRS, CRB) about 10 years ago

Jeff, loves it when you reblog his posts, he said so. :)

This was good and I plan to do so later.

Posted by Missy Caulk, Savvy Realtor - Ann Arbor Real Estate (Missy Caulk TEAM) about 10 years ago

Marchel - And what isn't said is the risk to the "co-borrower's" credit, should payments become late.  I have friends in another state that "co-signed" a mortgage for one of their children in 2006.  There's is one of those areas hard hit by the real estate crisis, so you know what the result of that has been!

Posted by Myrl Jeffcoat, Greater Sacramento Real Estate Agent (GreatWest Realty) about 10 years ago

Hi Marchel:  Just stopping by to say hello to you.....Hope all is well!  I do like Jeff's posts they are very expert on the subject of loans!

Posted by Sidney Kutchuk - Realty Works Temecula Kutchuk - Realty Works Temecula, Realty Works Temecula (Realty Works Temecula) about 10 years ago

Thanks for all the IDX/HAR information ... I am still trying to process everything and pass along to my web designer .. THANK YOU FOR ALL YOUR INPUT!!!

Posted by Pippa Mac, The Woodlands TX Real Estate (Chevaux Group Realtor, The Woodlands and Spring) about 10 years ago

Marchel, great post to re-blog.  I'm sure it will open the eyes a little of buyers thinking with a co-signer it's going to be a slam dunk.

Posted by Nick T Pappas, Madison & Huntsville Alabama Real Estate Resource (Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Huntsville AL) about 10 years ago

this is a great post / re-blog, nice information for buyers and people who doesn't have good credit, take care and hope to see more from this.


Posted by Ray Saenz, Homes for Sale in Laredo, TX - Texas, Realtor (Exit Realty Laredo) about 10 years ago

Many potential home buyers are 3 to 6 months away from repairing their credit and qualifying for a home. They need a good mortgage broker and a caring Realtor who will guide them through the process.

Posted by Dave Halpern, Louisville Short Sale Expert (Keller Williams Realty Louisville East (502) 664-7827) almost 3 years ago

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