Published on August 26th, 2020 | by admin0
What You Must Know About Co-Signing For a Mortgage
Home buyers might need a co-signer to help
them get a mortgage. A co-signer offers help when a borrower cannot get the
mortgage on their own. Lenders approve mortgages faster if the borrower has a qualifying
co-signer. Reviewing what borrowers need to know about co-signing prepares them
for these responsibilities.
Both Parties Undergo a Credit Check
Both parties undergo a credit check before getting approval. The original borrower needs a co-signer if they don’t have enough credit, or they have poor credit. The co-signer must have an established credit history that presents them as creditworthy, and they must have a stable work history. Both parties must be approved by the lender to get the mortgage. The co-signer needs better than average credit scores to get lower interest rates.
Employment and Income Evaluations
The borrower and co-signer must have verifiable employment and income. Their employer must complete forms that verify how long the borrowers have been on the job, and their earnings with their current employer appear on the completed forms. Each party must provide two years of tax returns to show their income history. If the mortgage has income restrictions, both parties must meet these requirements.
The Responsibilities to the Lender
After the approval, both parties share responsibility for the mortgage. The lender retains the legal right to take legal action against both parties if the borrower defaults on the mortgage. A foreclosure will appear on each party’s credit history and prevent them from getting another mortgage for at least four years. If the property is sold through an auction, the lender can file a lawsuit against both parties to collect the remaining balance.
Maintaining Insurance Requirements
Maintaining the insurance requirements prevents a violation of the terms of the mortgage contract. Standard requirements are homeowner’s insurance and mortgage insurance. The buyer must get flood insurance only if the property is in a designated flood zone. The borrowers must purchase the insurance policies before the property closing. The lender won’t provide the wire transfer if the property isn’t insured. Buyers that need help with insurance requirements approach a lender or for help contact Dustin Dimisa for more details now.
When to Refinance the Mortgage
The original borrower can refinance the mortgage after they have established credit or improved their credit scores. Once the borrower proves their creditworthiness, they can apply for a new mortgage and remove the co-signer. Refinancing gives them lower interest rates and more affordable payments.
Refinancing also helps the borrower access some of their equity for renovations or eliminating debts. The opportunity gives the borrower a chance to improve the property with upgrades, and they can increase the market value of the home. Reviewing refinancing options helps the borrower get the most out of the mortgage.
Borrowers with poor credit or not enough credit might need a co-signer to secure a mortgage. The co-signer shares the same responsibilities as the original borrower. However, the borrower makes the payments. Legally, both parties could be sued if the loan isn’t paid in full. Borrowers can find out more about the requirements for a co-signer by contacting a lender now.