Greg

Your interest rate will be determined by the lowest credit score. So if your credit score is lower than your parents, placing them on your mortgage will be of no assistance in that regards. Neither will their income or the amount (unless its over 20%) of your down payment.

Greg,
This is a loaded question... If you obtain a mortgage with anyone besides yourself, everyone MUST qualify for the loan and their debt to income ratios have to be in line with what the lenders programs state.
That being said, your rate will depend on all factors involved especially of you are doing a conventional loan. The best thing to do is to have your loan officer run the scenarios by yourself and with your parents to see the difference and then you will know for sure. In addition, if you are a first time home buyer then it may affect the tax credit you receive if you are hoping for that and you settle before November 30th.

If you have any questions about this please do not hesitate to call me directly.

Did you know there are only 2 months left until the Free $8,000 tax credit expires?
Start looking NOW – the average homebuyer takes 2-3 months to find and settle on a home
The deadline to settle is November 30th 2009—do your friends a favor, tell them to call us today

Carmel Archdekin
REALTOR
Coldwell Banker Preferred
223-225 Market Street
Philadelphia PA 19106
Office: 215.923.7600
Cell: 215.680.5998
EFax: 215.940.8207 http://www.cbpref.com
WINNER OF 2008 COLDWELL BANKER ACHIEVERS SOCIETY AWARD

Greg,
Taking a loan with your parents will help if your own credit score is low or if you don't have enough money for a down payment. But if you have a steady job history and has maintained a good credit score, you can get a low interest rate by yourself. Remember, interest rates are at their lowest right now.

Greg,

It depends on alot of factors, such as what your credit score is? Why do you need a co-signer? How much are you putting down? In this market whether you go FHA or conventional the rates are fantastic. What is your loan amount. I really don't think you need to worry about it unless you can't qualify on your own. Rates are under 5% right now, so how much lower can they really go on a conforming conventional loan.

The basics of co-signing a loan

Lenders generally take a cautious approach to first-time borrowers. Without a credit history to go on, it's not unusual for them to require a co-signer before they hand over a check.

A borrower who's been told he needs a co-signer isn't necessarily considered a poor credit risk. Often, it's because there isn't enough information to make an informed decision, which in banking circles means 'No.'

Jack Naramore, president and CEO of the Birmingham, Ala., region of Colonial Bank, estimates that only about 10 percent of borrowers need a co-signer to qualify for a loan. Most often, the reason is that a person has little or no credit history upon which to base a decision.

Lending help
The most frequent scenario is a parent "trying to help out a child or a college student," he says.

Co-signers typically will have well-established credit to help the borrower qualify for the loan. But being a co-signer isn't like giving a person a reference on a job application. It carries a weighty responsibility and some potentially significant implications that need to be understood before it's taken on.

That's because you're not just vouching for the borrower's ability to repay the debt, you're promising to pay it yourself if the borrower defaults.

Careful, co-signer

If someone asks you to be a co-signer on a loan, you need to consider the borrower's character and ability to make the payments, and whether you could afford the debt if the borrower defaults, Naramore says.

"The main thing they need to understand is that they are signing that loan for a reason," Naramore says. "If the loan goes bad, they have to pay it back. That's what everybody has to be prepared for. They need to look at this as if they were taking out the loan themselves."

You should be especially wary if the borrower asking you to co-sign is getting the loan from a finance company. That means he's been rejected by traditional lenders and the loan carries a high interest rate. Plus, the Federal Trade Commission reports that three out of four co-signed loans with finance companies wind up being paid by the co-signer

The FTC puts the situation into simple terms in its information on co-signing. You're being asked to take a risk that a professional lender has decided not to take.

The risks are real and significant. The lender doesn't have to exhaust every possible means to get the money from the borrower before he comes after you.

"The bank or creditor can select which debtor he wants to pursue," says Bob Doyle, a certified public accountant and personal financial specialist in St. Petersburg, Fla. "He'll pick the one who is the most likely to pay the quickest."

If the lender sues to collect, you could get hit with attorneys' fees, and if he wins the suit, your wages could be garnished. If you pledged property, such as your car or furniture, you could lose it.

If you're thinking that a lender could just repossess the item, think what that will do to your credit report. Plus, if it's a car, it's been depreciating since the day it was driven off the lot. It might not be worth as much as the balance of the loan.

In addition, most people don't realize that the loan can affect their own ability to get financing. Since a co-signer is legally obligated to pay the debt if the borrower defaults, it counts the same as their own loans on a credit report and is factored into their debt-to-earnings ratio.

"If you're one of those folks out there who may not have exemplary credit and in two years realize you need to get a car and you have mortgage and credit card balances, I don't think you'd qualify," Doyle says. "That's your risk."

Stuart Cohen sees what can happen with co-signed loans quite often. He's the regional education coordinator for the Consumer Credit Counseling Service of Southern New England.

"There are people who end up with debts they didn't know they were going to have," Cohen says. "They still have to repay them, often by using our debt-repayment plan. I can't tell you how many family relationships are stressed by that."

Minimizing the risk
The FTC suggests two steps you can take to try to protect yourself.

First, ask the lender to put in writing that he will notify you if the borrower doesn't make a payment. That should give you time to handle the situation before it gets out of control.

Second, ask if you can limit your responsibility to the value of the

Greg,

The answer to your question can go one of two ways...either yes, it can or no it won't. This is obvious, however understanding why is the more complicated part. Having a co-borrower on your loan can benefit you in the same proportion that it can hurt you. David mentions very important pieces to the puzzle, so-to-speak. There are some factors that will directly affect your RATE and there are some factors that will directly affect how you QUALIFY for the loan.

Credit rating is important. The FICO score which is the "numeric value" of your credit rating. Having someone on your loan that has a high FICO/credit score may help for both lowering your rate and helping to qualify. A lot of lenders give pricing adjustments to the interest rate based on your FICO score when "pricing" your loan scenario. Meaning that there is a price improvement (decrease in rate) if a borrower has a FICO score of over "X". Conversely, if the borrower has a FICO score of less than "X" the price adjustment affects the rate negatively (increase in rate). This directly affects your rate!

Regarding qualifying; sometimes the more important issue pertaining to co-borrowers and credit. The score as explained above IS important to the loan scenario and interest rate pricing. But having a co-borrower presents another issue that must be considered.

What is the debt that is being brought to the scenario with adding the co-borrower?

The co-borrower can have a really high FICO score, but what if they have a lot of debt? Lenders will also greatly take into consideration the overall debt-to-income ratio (DTI). This is another factor that may or may not hurt your scenario.

Income (DTI) ratio is as important if not more important than FICO score lowering the rate. It can sometimes be the difference between qualifying. Consider the DTI to be the ratio of total monthly income divided by total monthly liabilities (credit debt). Lender's require all parties included on the loan to NOT exceed a maximum debt-to-income ratio of "Y". By bringing another person (co-borrower) on the loan, you increase the chance of raising the DTI. Again conversely, you can lower the DTI by bringing on a co-borrower who has income but little to no debt; lowering the overall debt-to-income ratio.

Loan amount will also directly affect your rate and payment. The Conforming loan amounts usually have the best rates. The more you borrow, the higher the rate is!

Hi Greg, as Grace suggested, the only one who can really answer your question accurately is your mortgage professional.

With that said, let me give you an idea on what might cause your rate to go up, or down. Lenders look at credit scores, job history and income, and also downpayment.

Think of it this way, the more risk for the bank, the higher the interest rate.

Good luck,

Dave Tap Tapper
Realtor
Cashin Company http://www.DavidTapper.com
650-403-6252

Hello Greg and thanks for your question.

Actually, I have many clients who 'team" with their parents to purchase property, and if you don't have much down payment or less than sterling credit, doing so can be a benefit to you as a buyer. Unfortunately, however, it is impossible to "guesstimate" if there would be a reduction in the monthly mortgage if you add your parents to the loan as there are so many variables that affect the loan rate and amount. Adding your parents to the loan tends to make getting a loan easier, but not necessarily cheaper.

To get the best and most accurate information, talk with a qualified mortgage broker regarding your situation and that of your parents. If you should need any references for mortgage brokers, please feel free to contact me.

Sincerely,
Grace Morioka, SRES, e-Pro
Area Pro Realty