Home Buying in Los Angeles>Question Details

W.b., Home Buyer in Los Angeles, CA

Should anyone ever allow a relative to co-sign a home loan?

Asked by W.b., Los Angeles, CA Sat May 17, 2008

I make a decent salary and could afford the mortgage, taxes, etc. on a home for 340k. I've been on my job for more than 10 years and my credit is above average. I'm a single parent and my kids (boy & girl) still share a room and are now teenagers. I really need to move and, although I could easily afford the expenses involved in ownership (townhome) I'm told I would need a co-signer. I would have to move to the Inland Empire to find a home for less than 300k and my kids are doing well in school where I am now. I've heard of medicare liens and I'm aware that the co-signer is as liable as the main borrower. I've also been told I could always refinance the loan later - I'm expecting a decent raise in October. Should I let my Mom co-sign? She really wants to do this. She is retired and on a fixed income. Are there any benefits she would lose out on, as a property owner, because she's elderly? Would she be the co-borrower or would she be listed as a borrower?

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Hi W. B. ,

I can't answer a question on whether or not your mom should co-sign on the loan with you. I think with your mom being elderly, you need to consider whether or not this might somehow affect her medicare or social security benefits.

Also, check into buy down loans. These loans help buyers qualify for a larger mortgage and keep the payments lower for the first three years and then revert to a fixed loan. I'll put a link to the post I did on them.

Just another option to consider.

1 vote Thank Flag Link Sat May 17, 2008
i don't have the 5% down and plan on using the Nehemiah program. thanks for answering !!
0 votes Thank Flag Link Wed Jun 4, 2008
Hi W.b,
I hope it is not too late to answer your question! There're many programs out there but most importantly is know the precentage of your down payment. If you only put 3% down then FHA would be the only source. If you can put 5% down with an above average credit (no BK, No NOD), I would suggest to try Countrywide. I don't see why you need to have your mom co-sign the loan in case you can come up with 5% down. Is you mom going to live with you? The Occupancy does matter on some programs. If you let me know a little bit more I sure will have better suggestion!
Good Luck!
Sunny Hermoso
Web Reference: http://www.sunnyhermoso.com
0 votes Thank Flag Link Tue Jun 3, 2008
YOur mom should be able to co-sign the loan, however, if your income is higher than hers then you automatically become the primary borrower. Co-borrowers are just as liable as primary borrower. Check with reputable lenders to see if you really need her to get the loan.
0 votes Thank Flag Link Sun May 25, 2008

Based on your quick history, there are program out there where you can obtain excellent financing. You must consult with different lenders such as banks, and brokers, this is with the whole idea to identify what is best for you. Co-signers are always welcome, but you definitely can be on your own! don't get discouraged easily and do your homework .

If you need a reputable loan officer contact me and I will refer you one who is honest and will work relentlessly for you.
0 votes Thank Flag Link Sat May 24, 2008
You can do it. How much do you value this persons relationship?
Web Reference: http://getprequalified.com
0 votes Thank Flag Link Sun May 18, 2008
Thanks Irina and everyone else for the information !!!
0 votes Thank Flag Link Sun May 18, 2008
W.B. - Thanks for the response. However, have you looked into AmeriDream, which allows seller contribution of 10% towards down payment and 6% towards closing costs? Have you looked into MCC? Has your lender introduced you to all the LA City and County down payment assistance programs (assuming you are a first time homebuyer)? Is part of your qualifying issue the fact that you are looking at a townhome with HOA fees? And lastly, did your lender tell you that your mom, living on a fixed income, would be a qualified co-signer? Something tells me there might be more opportunities available to you than you think. Hope you get this worked out and find a way to buy your Dream Home.

Shel-lee Davis
Real Estate Consultant
RE/MAX Palos Verdes Realty
0 votes Thank Flag Link Sat May 17, 2008
Thanks Shel-lee & Don !!!
I was told I'd need a co-signer even with FHA and using the Nehemiah program for a loan amt of 340k.
0 votes Thank Flag Link Sat May 17, 2008
W.B. - It is often a great idea to have a parent help a child purchase their first home. However, based on the scenario you present above, I am not sure your mom would be an effective co-signer, since she lives on a fixed income. Usually, the banks want a co-signer that could make the payment themselves if you default. It does not sound to me like this is the case. Before you go that route, there are a number of questions you should answer.
1. Are you a first time homebuyer? There are lots of down payment assistance programs and other govt monies available that would help you buy more home.
2. Have you looked into FHA loans? They allow for higher front end and back end ratios (in other words, they allow for your mortgage to represent a higher percentage of your income) and they are not just for first time homebuyers.

I specialize in working with first time homebuyers. I can probably help you get to the bottom of the financing questions by connecting you with some of resources. Contact me if you want to discuss this further. Just click on my profile or call me at 310-710-8572.

Shel-lee Davis
Real Estate Consultant
RE/MAX Palos Verdes Realty
0 votes Thank Flag Link Sat May 17, 2008
I'm not a lawyer or an accountant, so this isn't legal or accounting advice. However....

Lots of people have relatives co-sign for them. In fact, when my wife and I bought our first house, my mom co-signed. And it's worked out fine. My wife and I have made the payments on the house, and my mom hasn't been affected.

Now, you have to realize that if you default on the loan, they'll come after your mom. That's the whole point of a co-signer. Your mom would be saying that if you default, that she'll pay. So, you should be very confident that you will be able to make the payments. Otherwise, she'll be on the hook.

As a co-signer, your mom's FICO score will be negatively affected. Not hugely, but some. And that's because of her exposure in the event you default. However, if she's elderly, retired, and on a fixed income it's likely that: (1) her FICO score is pretty well established based on her own financial behavior, and (2) she can afford to "sacrifice" a few points.

Check with an elder law expert on whether there'd be any ramifications to her being a co-borrower (or if she's put on the deed, a co-owner). There might be. You have to look into that.

So, consult a lawyer and an accountant. However, if they say it's OK, then it's OK...so long as you know you can handle the mortgage.

Hope that helps.
0 votes Thank Flag Link Sat May 17, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
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