A Co-signer Can Aid Home Loan Approval

by : Melissa Kellett

Getting approved for a loan can be complicated, especially for those who do not have perfect credit score. Everyone wants and deserves to own his own house and when a desire is so strong, solutions always arise. Applying for a home loan with the aid of a co-signer can help you meet the requirements that most lenders demand for home loan approval.

Many requirements are usually not met by main applicants but can easily be fulfilled by a co-signer. What one alone can not get, can be achieved by the power of two combined. When you apply with a co-signer, his credit score, income, credit history, assets, etc. are also taken into account at the time of loan qualification and if either you or the co-signer fulfills a requirement, it is considered to be covered by the two of you.

Co-Signer: Concept

When you apply for a loan with a co-signer, he is responsible for the repayment of the loan as much as you. He is obliged by the same loan terms and is legally responsible just like you. If you fail to meet the monthly payments, the co-signer has to pay the installment since otherwise, the lack of payment will also be recorded into his credit history.

Being a co-signer implies risks. If you are asked to act as one, bear in mind that you will be responsible for the lack of payment of the main applicant and will have to substitute him or else the delinquency will be reported and added to your credit report. Moreover, the lender can take legal actions against you in order to recover his money. The lender does not have to follow a certain order, he can choose between claiming you the money or the main applicant.

Requirements Not Met

There are income requirements for home loans that you may not be able to fulfill. When applying with a co-signer, the incomes are combined and if the addition of both meets the requirements you can get approved. In many cases, when it comes to couples the combined income can raise a bit the required minimum but it never reaches more than 20% more.

Credit requirements are also important when it comes to home loan approval. In this case instead of adding, the co-signer credit situation can replace yours and fulfill the requirements. If your credit score will not allow approval, the co-signer's score will be taken into account and if his reaches the minimum score required, the loan will be approved without hassles.

100% Financing

In many cases, in order to get approved for a home loan, a down payment is required. If you can not provide a down payment, you can opt for requesting 100% financing on your home loan. But approval for this kind of loans is complicated. In order to guarantee approval you may need to apply with the aid of a co-signer. That way you will be able to obtain full financing for the whole property's value without having to put money down.