Co-Signers, co-borrowers, and the mortgage process

Co-Signers, co-borrowers, and the mortgage process

Co-Signers, co-borrowers, and the mortgage process

Mark Wells of Preferred Financial discusses which loan programs do and do not allow for co-signers, and when a co-signer can make a difference in getting loan approval.


What is the difference between a co-signer and a co-borrower?

A co-signer is someone who signs onto a mortgage loan to strengthen the loan, but does not intend to live in the house with the primary borrower. A co-borrower is a person who jointly signs a mortgage loan and intends to occupy the house with the other borrower.


Do all loan programs allow for co-signers?

While all programs allow for co-borrowers, not all allow for co-signers. VA loans can only be obtained by a military veteran and his or her spouse as co-borrowers. USDA loans will only allow for co-borrowers and do not allow non-occupant co-signers to be on the loan. FHA and conventional loans do allow for co-signers.


Can a co-signer make up for weaknesses in my credit scores?

Generally speaking, a co-signer cannot be used to help a borrower whose scores are below the program limit. So if you have a 580 score on a loan program that is requiring a 620 minimum score, the co-signer will not help you qualify no matter how strong his or her scores are.


Then what good is a co-signer?

Even if you have the minimum score the program requires, other factors affect loan approval. If your scores are on the lower end of the acceptable scale, a co-signer with strong scores can make all the difference in obtaining loan approval. Also, a co-signer can always strengthen income weaknesses of the primary borrower. If your job consists of irregular income, or if you are self-employed and your average income is not enough to carry the housing and debt payments, a co-signer with strong income can make the difference in obtaining loan approval.


If I am using a co-signer for an FHA or a conventional loan, how does that affect my down payment and qualifying debt ratios?

For FHA loans, there is no effect at all. You can still put as little as 3.5 percent down, and the down payment can come from your co-signer or from another family member as a gift. On an FHA loan, it does not matter how much income you make as long as together with the co-signer, you meet FHA debt-to-income requirements. If you apply for a conventional loan with a co-signer, you will have to put 10 percent down rather than the normal 5 percent, but the 10 percent can come from the co-signer or from a family member. In regard to debt ratios, the house payment cannot exceed 50 percent of your own income, regardless of how much income the co-signer has.

I welcome questions and comments and is happy to discuss any loan situation you have involving a co-signer. I can be reached at (864) 235-9596 or via email at

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