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Dizzle1010

Co-signing/co owner

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Posted (edited)

Hello,

 

I have recently been asked to co-sign a home loan since the primary borrower does not have good enough credit. They have the means to make payment are putting a good amount of money down. 

 

My ultimate goal is to get myself removed from the loan asap and potentially add my wife on it as a replacement(it’s for her parents) 

 

Should I do a co-borrower instead of co-sign as a safety measure?  Since co borrowers half ownership rights. I don’t plan on occupying the residence and they will be paying for it fully. 

 

How soon can I get myself out of the loan is either situation? How soon can my wife be put on it instead of me? She will start earning by beginning of next year. 

 

I have good credit and around 32% DTI

 

How will this affect me in future loans I want to get (car, 2nd property) I already had 1 home, 2 cars and student loans on my credit. 

 

How long would it take for the cosign/Co borrower to no longer impact my eligibility for future loans?

 

thank you! 

 

Edited by Dizzle1010

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please please please please do not do this. it is a terrible idea. there is really no such thing as co-signing... you will be as liable for the loan as the other person.

 

also, most mortgages I've ever heard of are closed-end loans which means that they cannot be changed in the way you are hoping; you would have to refinance and if the person you are JOINTLY taking the mortgage out with has bad credit now, how do you know in the future s/he will be able to finance it all in his/her name?

 

co-signing is always a terrible idea and especially for the situation and goal you describe.

 

and... welcome to CB :wave: :)

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Thanks for your feedback and welcoming message?

 

I understand your response but what if co-signing is something I just have to do. If so, what’s the ideal situation I can set up (co borrow?) FHA streamline? Or do the 12 month proof of payment by other party so that the loan doesn’t count against my DTI?

 

 

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you always have a choice. you'd be better off buying it by yourself and renting it to them. then you can show rental income of the property covering the mortgage when you apply for another loan.

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You are either on the note as a borrower or you are not.  There is no "cosigner" option on a mortgage.

 

As a co-borrower, the mortgage will report on your credit and will count against your DTI when you're evaluated for future credit.  

 

You'll have to check the mortgage account every month to make sure the other party actually makes the payment on time, and then when they don't, well...  then what?  

 

To get your wife's name substituted for yours later, you'd have to refinance, which will cost a few thousand dollars.  The "no-cost" refinances you see advertised come with less favorable terms (higher rate, for example), so there are significant costs involved no matter what.

 

There are multiple potential failure points in this plan, which means that the chances this would end well are extremely remote.  

 

There are other ways to help.  Good luck.

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