How Does Co-signing Affect Your Ability To Buy A Home?

There are many situations where getting an FHA home loan can be complicated by circumstances. One good example– a borrower who has co-signed with a family member or friend on another financial obligation such as a home, vehicle, or student loan. One common question on topics like these: “How will cosigning affect us if we want to buy a home soon using a FHA or Conventional loan?”

FHA loan applicants in this case would have what’s described as a “contingent liability”. That means basically that the borrower isn’t paying the other person’s debt, but could be obligated to pay under certain circumstances. And that could be counted in the borrower’s debt to income ratio, depending:

HUD 4000.1 has the rules for contingent liability, stating that the lender must, “include monthly payments on contingent liabilities in the calculation of the Borrowers monthly obligations” unless the lender is able to verify and obtain proof, “that there is no possibility that the debt holder will pursue debt collection against the Borrower should the other party default or the other legally obligated party has made 12 months of timely payments.”

Contingent liability is an important issue when it comes to FHA loan approval. If you are considering an FHA home loan in the future, it’s good to think seriously about co-signing and whether or not being a co-signer on another person’s loan could interfere with your chances at loan approval. As we can see from the above, co-signing is not necessarily an automatic barrier to getting an FHA mortgage.

But your lender will definitely need proof as described above.

Timing could be the key– If you have only recently co-signed on another person’s loan, the 12 months worth of on-time payments won’t be available as a matter of record to help the lender justify approving your loan. That is very important to consider when reviewing your options.

If you have been a co-signer for longer than 12 months and the payment record is solid, you’re a lot closer to the goal of FHA loan approval. In cases where there might have been a missed payment by the other party, it’s best to wait until that 12 month period as elapsed (with on-time payments) before applying for a new home loan.

Tips For Your First Meeting With A Mortgage Lender

Congratulations on deciding to become a homeowner. Here at Mortgage Solutions LP, we understand that buying a house is a huge commitment and can be a daunting experience. As your Kingwood mortgage lender, we have made a list of tips to help you prepare for your first meeting with your mortgage lender.

  1. Be prepared with documentation

    At your first meeting, it is important that you bring all the necessary documentation. This includes but is not limited to, your personal ID, social security number, proof of income, proof of employment, bank account statements, and your last two years of IRS tax returns.

  2. Have savings

    It is important that you show proof of your savings. When you buy a house you will generally have to pay a down payment. This is typically between 3% to 20% of the overall purchase price. What borrowers generally do not know is that you cannot borrow the money for your down payment from friends or family. Having proof of savings will show that you can afford a down payment and are financially ready to take on the responsibility of homeownership.

  3. Be honest

    As your Woodlands mortgage lender, we understand that it is not uncommon for people to have blemishes on their financial record. Do not try to cover it up. Be honest if you have ever filed for bankruptcy, have a low credit score, or have a lot of debt. We will work as best we can to overcome these hurdles and still try to find you the best products available. We have helped many clients with problem credit, increase their credit scores.

  4. Property Details

    Make sure you have as much information as possible about your new potential property. This includes all the real estate taxes, flood zone status, and any potential repairs that may be required.

Whether you are looking for a Cypress mortgage lender or are wanting a home loan in Pearland, contact Michael Durr today at 281-348-9899 to get started.

My Interview – Getting to Know Your Local Businesses – Kingwood

I had the honor of being interviewed for as a part of their series dedicated to getting to know more about the professionals who are involved in local businesses. As the original Kingwood Mortgage Guy, I am proud to have built the Kingwood Mortgage Guys from the ground up and to be able to share more about myself and my business with the local community.

I have lived in Kingwood, with my wonderful wife and children since 1990. I made the decision to enter the mortgage industry as a loan officer in 1997. During my time in this position, I began contemplating how I could best serve the people of Texas by finding them affordable options for their home financing needs. With this goal in mind, I started my own consulting business in order to better focus my time and energy on my clients and the mortgage lending process.

As you will see from the article that was posted on the Kingwood website, I concentrate the majority of my business on residential financing for purchase and refinancing loans. Within this focus, I am proud to offer my clients a variety of financing options that include, but are not limited to, Conventional, Jumbo, Cash Out, FHA and VA loans.

I am proud to have worked so hard to be in the position I am in now – a position that allows me to work one-on-one with each and every client. When my clients have difficulty qualifying for a loan, I provide my knowledge and experience as we work together to create a plan of action to help them get approved for their mortgage in the future.

My favorite part of the business I am in is, being there to witness the joy on my clients’ faces when they are approved for their mortgages. This is especially true when their journey has been a long one that we have pushed through together.

To find out more about special promotions I am working on, the bi-weekly webinars I host, and my vision for the future of my company, check out the complete article here.


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