Buyers with non-qualifying income get loan with co-borrower
Mortgage banker: Terry Hastings
Home value: $320,000
Loan amount: $300,000
Loan terms: 4.875 percent, 30year fixed
Backstory: Hastings received a call from a couple who were expecting their first child and anxious to buy a home.
One spouse was working fulltime but the other spouse was only working part-time. Their credit was lower than expected but it was important to find a house to start their new family. What could they do?
Hastings met with them to go over their situation. He pulled their credit report to analyze the score and see what could be done to quickly improve it. After reviewing their job history and paystubs, Hastings explained that due to the short length of the part-time job, that income could not be used.
Typically, a bank will look for two year’s history for part-time income. This left them very short of qualifying for a mortgage loan even though the borrower was training for a new full-time job in another industry.
Hastings asked if they had a relative who might be willing to be a “non-occupying co-borrower.” He explained that if they had a blood relative willing to sign the mortgage loan as well, their income could be considered.
Hastings spoke to one of the parents who were considering co-signing the loan. A “co-signer” has to go through the same steps as a regular borrower. Hastings collected their income statements, pulled the credit report and determined how much money was left over after the parent had paid their own obligations. That excess money could then be used as qualifying income for their child.
Hastings cautioned about any late payments being reflected on their report even though they were not living in the house. However, if the parent needed to borrow money later that cosigned mortgage would not be considered by his bank as an obligation if they could show that the kids had paid it for 12 months. He urged them all to keep vigilant records of payments.
The parent agreed and Hastings collected the rest of their information and ordered an appraisal. His bank was able to generate electronic disclosures which allowed the borrowers to “e-sign” on their computer or phone and the loan was approved one week later!