Posted on: 30th Dec, 2008 06:49 pm
Hello all,
My wife and I are looking to purchase our first home in the coming months, and as a result of our initial conversation with with a mortgage broker I have a couple of questions that I was hoping I could get the community's opinion on.
First, the broker told us that banks would use the lower of my wife's and my credit scores in determining the rate that they will offer us, essentially negating my excellent credit in favor of her mediocre credit. Is this often the case?
Second, we were told that if we were to use a non-occupant co-borrower to supplement our income and help us qualify for the loan, that loan would have to be guaranteed through FHA, and this would add a 1.8% fee to our mortgage. Is this accurate?
Thank you so much for your help!
My wife and I are looking to purchase our first home in the coming months, and as a result of our initial conversation with with a mortgage broker I have a couple of questions that I was hoping I could get the community's opinion on.
First, the broker told us that banks would use the lower of my wife's and my credit scores in determining the rate that they will offer us, essentially negating my excellent credit in favor of her mediocre credit. Is this often the case?
Second, we were told that if we were to use a non-occupant co-borrower to supplement our income and help us qualify for the loan, that loan would have to be guaranteed through FHA, and this would add a 1.8% fee to our mortgage. Is this accurate?
Thank you so much for your help!
Hi CR,
As far as I know, the mortgage broker considers either the middle or the lower credit score of the borrower. I guess the broker that you are dealing with considers the lower credit score for giving a mortgage loan. In my opinion, you should check out with other lenders and see if they will consider your credit score or not. Then accordingly you may change your lender.
If your credit score is low and if your income is not excellent, then the lenders may ask for a co-signer. And in case if you are unable to give a 20% down, the lenders may ask for a mortgage insurance. I think you are not paying the down-payment required by your lender so he is asking for a insurance.
Thanks
As far as I know, the mortgage broker considers either the middle or the lower credit score of the borrower. I guess the broker that you are dealing with considers the lower credit score for giving a mortgage loan. In my opinion, you should check out with other lenders and see if they will consider your credit score or not. Then accordingly you may change your lender.
If your credit score is low and if your income is not excellent, then the lenders may ask for a co-signer. And in case if you are unable to give a 20% down, the lenders may ask for a mortgage insurance. I think you are not paying the down-payment required by your lender so he is asking for a insurance.
Thanks
Hi CR,
When it comes to using your wife's score and yours, I don't think the lender would take the lower one. In fact, lenders consider the higher score as because it can help you get a lower rate.
I'd like to know what your scores are. Do you have credit scores from all 3 bureaus? If yes, then as James said, only the mid score will be considered. For example, if your scores are like 650, 700, and 750, the lender would consider 700 while qualifying you for the mortgage.
If you are using another person's income to qualify for mortgage, then I think you're opting for a cosigner and not co-borrower. The lender has charged a fee perhaps because it's included in his policy.
I don't think the loan needs to be guaranteed through FHA. Any conventional lender can offer a loan to borrowers who use a non-occupant cosigner. And, such lenders do allow borrowers to purchase mortgage insurance policy from any private company instead of the FHA.
Good luck
When it comes to using your wife's score and yours, I don't think the lender would take the lower one. In fact, lenders consider the higher score as because it can help you get a lower rate.
I'd like to know what your scores are. Do you have credit scores from all 3 bureaus? If yes, then as James said, only the mid score will be considered. For example, if your scores are like 650, 700, and 750, the lender would consider 700 while qualifying you for the mortgage.
If you are using another person's income to qualify for mortgage, then I think you're opting for a cosigner and not co-borrower. The lender has charged a fee perhaps because it's included in his policy.
I don't think the loan needs to be guaranteed through FHA. Any conventional lender can offer a loan to borrowers who use a non-occupant cosigner. And, such lenders do allow borrowers to purchase mortgage insurance policy from any private company instead of the FHA.
Good luck
cr, when a joint application is filed for a mortgage request, the industry standard is that the lesser of the two mid-scores is used to determine eligibility. it's not an arbitrary rule of your lender, but a standard that's been in place for years.
i'm in agreement with caron - at least in part - about the non-occupant coborrower. i believe that conventional loans will allow this, but i would hesitate to say that's a firm yes, since guidelines have changed so drastically in the last several months. for certain, fha loans will allow it.
why there would be a 1.8% "fee" charged to you is beyond me. i suggest you investigate further. if you plan to use this particular broker, perhaps you'd be wise to ask the broker to check around with other lenders to see if that can be eliminated.
of course, another alternative is to check with another broker or lender to try to eliminate what i view as an excessive charge.
one thing in your post, caron, that i have to disagree with: borrowers do not purchase mortgage insurance policies. lenders obtain mortgage insurance for their loans, depending on the parameters of the loan product, the insurability and the vendors with whom they have contracts.
i'm in agreement with caron - at least in part - about the non-occupant coborrower. i believe that conventional loans will allow this, but i would hesitate to say that's a firm yes, since guidelines have changed so drastically in the last several months. for certain, fha loans will allow it.
why there would be a 1.8% "fee" charged to you is beyond me. i suggest you investigate further. if you plan to use this particular broker, perhaps you'd be wise to ask the broker to check around with other lenders to see if that can be eliminated.
of course, another alternative is to check with another broker or lender to try to eliminate what i view as an excessive charge.
one thing in your post, caron, that i have to disagree with: borrowers do not purchase mortgage insurance policies. lenders obtain mortgage insurance for their loans, depending on the parameters of the loan product, the insurability and the vendors with whom they have contracts.
Yes this is absolutely true. It is just standard procedure. Ask
any loan officer.
any loan officer.
I don't think I have ever seen this many wrong answers in such a small space before. The lowest mid score of the two borrowers is always used. The last time that was not true was back when subprime still existed. Conforming loans do not allow for non-occupant coborrowers unless you are putting 20% down and even then the lender may not allow for that. FHA does allow for non-occupant coborrowers assuming you have a relative that wants to co-sign a loan for you. I would guess the 1.8% being discussed here is actually the 1.75% upfront MIP fee that FHA requires. I would say your broker has been dead on so far. He/she just may not have explained it well enough to you
i guess you haven't been around long enough, guest.
i will agree with you on the mip at 1.75. i overlooked that possibility when i responded.
i will agree with you on the mip at 1.75. i overlooked that possibility when i responded.
Hi.. I have a sort of relative question.. I really need enlightenment and hope for any expert's opinion. let me tell u my situation first. 5 years ago, i co-signed my mom's conventional mortgage to enable her to get a better interest rate and simply qualify her to apply for a mortgage (she earned minimum) and get much higher value loan so she can purchase a home. I was a non-occupant borrower then, but eventually moved into her home and currently live with her. 2 years ago, I started writing off the property taxes and mortgage interests on the property as advised by my tax preparer/accountant. Anyway,today, I am looking into buying my own place and have pre-qualified to buy on my own place or pre approved for my own mortgage. The property i am considering buying close to where my current address is (radius would be about 1/2 -2 miles away). I know am not going to be qualified as first time home buyer. And my mortgage consultant tells me i wont be able to declare that this home am considering buying would be a second home nor an investment property because of proximity. What's gonna happen is i'll be a 'co-borrower' or co-signer to the first home, and then have my own separate mortgage/ home is my primary home? And he tells me I will still be able to write off the property and mortgage interests/taxes on both properties come tax return season.I am sorta confused. I want to know if this is something i could do. And will it affect my credit score later then and ultimately, will it be a conflict when I claim my tax return . also, will i even be able to write off property taxes/mortgage interest rates on both properties? I really dont want to compromise my mom's mortgage to begin and need to get a place of my own soon but i need to know what am going to get into.. i know there's a lot more to know but if anyone can help me with this aspect, i would REALLY appreciate it!!! Thank you!!!
You COULD convince the bank that this new home you are about to purchase will be your primary home. Especially after you explain the scenario regarding the place you currently live in.
That being said, do not take tax advice from someone who is not a tax professional.
That being said, do not take tax advice from someone who is not a tax professional.
amen to what eric said about tax advice.
you will want to gather some sort of documentation from your mom's mortgage to verify that you entered into that transaction as a non-occupying coborrower; provide an explanation for why you moved into that home; provide an explanation for why you choose now to move out and purchase another new home closeby.
your statement about what the mortgage consultant said about "second home or investment property" is lacking sense. if you claimed the new property as an investment, you'll pay a higher rate, of course. it is true that you cannot claim it as a second home, and the proximity issue is correct. you will want to make a good case for it being your new primary residence in order to reap the most favorable interest rate.
you will want to gather some sort of documentation from your mom's mortgage to verify that you entered into that transaction as a non-occupying coborrower; provide an explanation for why you moved into that home; provide an explanation for why you choose now to move out and purchase another new home closeby.
your statement about what the mortgage consultant said about "second home or investment property" is lacking sense. if you claimed the new property as an investment, you'll pay a higher rate, of course. it is true that you cannot claim it as a second home, and the proximity issue is correct. you will want to make a good case for it being your new primary residence in order to reap the most favorable interest rate.
Is it true that borrower who have no FICO scores can still use non occupying co borrowers to qualify for a loan.
I don't think the lenders will allow a borrower with no FICO score to be on the loan as a "primary borrower".