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.

What is Mortgage Insurance?

If you are trying to obtain a mortgage with a small down payment (less than 20% of the total value of the loan), you may be required to pay for mortgage insurance.

Mortgage insurance is a type of insurance that is designed to protect home loan lenders should the borrower of the funds be unable to make the required payments on their mortgage. This could be because the borrower is no longer in the same financial situation and does not have the financial resources to pay or because the borrower has passed away. In either of these events, a mortgage insurance policy will ensure that the lender receives at least a portion of the difference between the funds they lent to the borrower and the amount the borrower has already paid back.

Mortgage insurance is typically required for borrowers that are borrowing 80% or more of the total loan value because mortgages with such high loan-to-value ratios are more likely to go into default.

Types of Mortgage Insurance
Depending on what type of mortgage you are obtaining – Conventional, FHA, VA, USDA, etc. – there are different types of mortgage insurance that may be required by your lender.

In some cases, private mortgage insurance, also known as PMI, may be required. PMI is a mortgage insurance policy through a private company. Initial fees and monthly premiums are typically lower with PMI but can vary based on down payment amount and the borrower’s credit.

In cases where the borrower is obtaining an FHA loan to purchase their home, the borrower will be required to pay for mortgage insurance through the FHA. FHA mortgage insurance does not vary much from borrower to borrower, as credit does not affect the cost of the policy.

Paying for Mortgage Insurance
Mortgage insurance can be paid as a monthly premium that can be added to your regular mortgage principal payments or it can be paid upfront as a lump sum.

The good news is that once you have paid off a certain portion of the principal balance of your mortgage, you will most likely be able to cancel your mortgage insurance policy.

If you would like to know more about mortgage insurance and whether you may be required to obtain a mortgage insurance policy for your loan, give the Kingwood Mortgage Guys a call today! We are always happy to help!

The Woodlands Mortgage – October Market Update

The Houston real estate market has taken a large hit following the devastation caused by Hurricane Harvey. Many people have lost their homes and valuable possessions, and the market has lost its great traction as we were previously maintaining record-breaking trends.

Of course, it is too soon to judge the full impact of this natural disaster’s impact on our local real estate markets, but we have already seen some significant changes in statistics across the board.

The most recent report released by the Houston Association of Realtors showed that single family homes sales fell by over 25%, marking the first time single-family home sales have dropped in nearly a year.

The inventory of home that are currently listed on the market has gone up slightly as everyone is taking the time to assess the damage to their own homes and make decisions about what to do and where to go next. The current 4.4 month’s supply of homes on the market is expected to decrease quickly as more families who have lost their homes enter the market to start purchasing new homes.

The price of Houston homes has remained seemingly unaffected by recent events, with the average sales price of single-family homes rising to $296,418, an increase of 2.6%.

As mortgage professionals who live and work in Houston and the surrounding area, we are dedicated to helping our fellow Houstonians as we work together to navigate this incredibly difficult situation.

If you have any questions about your financing options following Hurricane Harvey and would like to discuss your situation with a qualified professional that has your best interests in mind, give The Kingwood Mortgage Guy a call today!

If you are in need of temporary housing while you figure out your next move, visit or contact the Houston Association of Realtors.