Posted on: 09th Apr, 2008 12:55 pm
When they pull a credit report on a co borrower and his/her score is not as good as the main borrower, will they go by the main borrower score to factor what interest rate will be paid or will they look at both borrowers score and determine the rate. Basically,
a. Be the main borrower with good credit and get a lesser loan amount with a good interest rate or
b. Have a co borrower on with not so good credit and get approve for a larger loan amount but pay a higher interest rate or
c. Does the lender only look at the main borrowers credit score and considers the co borrower as additional income and does not factor in the credit score of the co borrower.
a. Be the main borrower with good credit and get a lesser loan amount with a good interest rate or
b. Have a co borrower on with not so good credit and get approve for a larger loan amount but pay a higher interest rate or
c. Does the lender only look at the main borrowers credit score and considers the co borrower as additional income and does not factor in the credit score of the co borrower.
it's not so easy to decipher what you're asking. is your "coborrower" a joint borrower - coowner - second borrower; or simply a "co-signer"?
a co-signer is one who has no interest in taking the loan, but is added merely for the purpose of helping the borrower get the loan. of course, your typical cosigner is one whose credit is good.
it appears you are talking about a jointly completed application, such as husband and wife would be. in this case, most (but not all) lenders will look at the lesser of the two scores, though both are considered. how much difference that will make in the interest rate is hard to conjecture - some products are very forgiving concerning credit scores and do not penalize in that fashion.
i would suggest applying jointly, and if you need to retrench and borrow only as the main borrower, thereby receiving less; so be it. it's all a matter of choice when you break it down, after all.
a co-signer is one who has no interest in taking the loan, but is added merely for the purpose of helping the borrower get the loan. of course, your typical cosigner is one whose credit is good.
it appears you are talking about a jointly completed application, such as husband and wife would be. in this case, most (but not all) lenders will look at the lesser of the two scores, though both are considered. how much difference that will make in the interest rate is hard to conjecture - some products are very forgiving concerning credit scores and do not penalize in that fashion.
i would suggest applying jointly, and if you need to retrench and borrow only as the main borrower, thereby receiving less; so be it. it's all a matter of choice when you break it down, after all.
Hi newbee,
Welcome to he forum.
George has given you sound info. Generally both of co-borrower credit score and the income will be will be taken on account. So I think if the main borrower has better credit and can get better rates and terms then he should apply it alone.
Feel free to ask if you have any further questions.
Best of luck,
Larry
Welcome to he forum.
George has given you sound info. Generally both of co-borrower credit score and the income will be will be taken on account. So I think if the main borrower has better credit and can get better rates and terms then he should apply it alone.
Feel free to ask if you have any further questions.
Best of luck,
Larry
The main borrower that has better credit will give strength to the application but the pricing will be based on the lower of the two applicants. For example, you may still get approved for a conforming loan because of the main borrowers credit but will most likely have a slightly higher rate because of the co borrowers score. This is the case for conforming loans that give more attactive terms than a non-conforming loan. A non-conforming loan will go by the main borrowers score only if they are the primary wage earner but the pricing will most likely be higher than taking a pricing hit on conforming. Basically, expect a little higher rate because of the coborrower if they score below 680.
Example A (conforming loan):
The loan limit, rate, and terms will be based on the lesser of the borrower or the co-borrower's middle credit scores. There is no exception allowed. Rates will be in the 5.5%-7% range depending on alot of variables
Example B (FHA, VA):
No minimum credit score requirement placed on borrower or co-borrower. Above 500 FICO is preferred but with compensating factors can go below that. Exceptions are generally made for compensating factors. Rates will be in the 5.5%-7% range depending on alot of factors.
Example C (Subprime):
The higher of the borrower or co-borrower is taken. ON average the loan to value will be much less than conventional or FHA would allow. Exceptions are made for compensating factors. rates are in the 8%-11% range.
The loan limit, rate, and terms will be based on the lesser of the borrower or the co-borrower's middle credit scores. There is no exception allowed. Rates will be in the 5.5%-7% range depending on alot of variables
Example B (FHA, VA):
No minimum credit score requirement placed on borrower or co-borrower. Above 500 FICO is preferred but with compensating factors can go below that. Exceptions are generally made for compensating factors. Rates will be in the 5.5%-7% range depending on alot of factors.
Example C (Subprime):
The higher of the borrower or co-borrower is taken. ON average the loan to value will be much less than conventional or FHA would allow. Exceptions are made for compensating factors. rates are in the 8%-11% range.
