Vince Kingston

Co-signers can be an effective way to qualify for a home mortgage when a borrower otherwise would not qualify on their own.  This can be a great option for First Time Homebuyers.  There could several situations where a co-signer could provide that extra qualifying momentum to help you purchase your home.  For example, FHA and Conforming both require that the self-employed document their income with two full years of tax returns.  If your business has been in existence for less than two years, then no matter how much current income it is producing, it will still not be allowed as qualifying income.  A co-signer could be a perfect option here. 

First some important basics about co-signers:  FHA allows non-occupant co-signers (meaning it allows borrowers to be on the application that will not reside in the home).  ***In order to qualify for the minimum 3.5% down payment on FHA, co-signers must be related to the primary borrower (s) by blood, marriage or law (spouses, parent-child, siblings, stepchildren, aunts-uncles/nieces-nephews, etc.), or for unrelated individuals that can document evidence of a family-type, longstanding, and substantial relationship.***  Clearly what constitutes a “long standing family type relationship” is somewhat of a grey area so this is where the guidance of your Mortgage Adviser can be important.  If you are attempting to purchase a 2-4 unit property using a co-signer and FHA financing, then the loan to value will be capped at 75% (25% down payment required).  But never fear, as long as the co-signer meats the criteria above, then for single family homes you are only required to make a 3.5% down payment. 

Conforming financing does not effectively allow for non-occupant co-signers.  The Conforming guidelines technically will not disallow this but they insist that the occupying borrower qualify with their income alone which renders a co-signer useless. 

A co-signer can help contribute qualifying income.  A co-signer cannot help you over come a very low credit score (below 620) because lenders use the lowest score on the application as the qualifying score (If you have damaged credit, read my “24 hours to better credit” blog and contact me for guidance).  Remember that lenders will use the lowest credit score on the application so if your co-signer has poor credit (below 620), then they cannot help you qualify.  The co-signer can also contribute down payment assets although if you did not need the co-signers income to help qualify, you could just have them gift these funds to you instead of joining you on the application.  It’s important to know that being a co-signer means they are 100% liable for the repayment of the loan and the documentation requirements are the same for the co-signer as the primary borrower (paystubs, W2s, tax returns, etc.).  The liability will show up on their credit report and could affect the co-signers ability to qualify for loans in the future.  However many lenders will exonerate the co-signer from the mortgage liability if it can be demonstrated that the primary borrower has been paying on time for at least 12 months.  

Employing a co-signer can be an excellent way to qualify for a mortgage, especially for First Time Homebuyers and the newly self-employed.  I am always available for your questions regarding using a co-signer and mortgage financing in general.  You can contact me anytime at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or 971-221-8525.