Cant qualify Enlist a cosigner coborrower or coowner

Okay, you've strengthened your borrower profile (income, debts, credit) and still your borrowing power's too weak to finance the property you want. Maybe you should bring in a cosigner, co-borrower, or co-owner. Here are some examples of how these techniques have helped first-time homebuyers—but they can also be adapted for use by investors.

Cosigners, Co-Borrowers, Co-Owners

"I'm not sure about this one," says loan officer Tiffany Lane to homebuyers Paul and Cindy Jackson. "Even counting both your incomes and 75 percent of the rents from the garage apartment, your qualifying ratios are high and your credit shows two 30-day late payments on your car loan during the past 12 months. I want you to get your home, but I'd feel more confident forwarding your application to the underwriter if we could get one of your parents to cosign your mortgage."

A cosigner guarantees to make your mortgage payments when you fail to do so. Usually a cosigner is a parent or other close relative. For borderline applications, a cosigner could tip the mortgage underwriter in your favor. Cosigners (sometimes called guarantors) can't change a flat turndown into an enthusiastic yes, but, in marginal cases where you look pretty good— but not quite good enough—a cosigner might strengthen your borrower profile enough to move your loan toward approval.

Co-Borrower (Co-Investor)

But what if your buying power needs more help? Then look for a co-borrower. Whereas a cosigner figures marginally in a loan approval, a co-borrower fully participates in the mortgage application process. Do your qualifying ratios blow past the loan program's limits? Add a co-borrower's income to your ratio calculations and bring them safely back into approval territory.

Use a co-borrowerwhen, in the eyes of a lender, your qualifying income alone doesn't look like it will support the amount of money you want to borrow; however, the co-borrower need not actually help pay for the property or your monthly loan payments. If you can come up with the payments—by using housemates, accessory apartments, second job, self-employment, tight budgeting, or whatever—that's all right. The lender won't care where the monthly payments come from, as long as you make them on time.

Often, to obtain lender's approval, beginning real estate investors bring in co-borrowers or co-investors. The beginner might contribute the work of finding a good promising property; the experienced money partner gives the lender confidence that the deal makes sense.

Co-Owners

Lifelong renter, Mary Mills (age 74) had ruled out the possibility of owning her own home. Especially now, she believed herself too old and too short of income. But one day she read a flyer distributed by a Shaker Heights realtor, Frank Berry. This flyer explained a technique that Frank calls

"co-op buying." Frank says, "It was something I stumbled upon. ... I stumbled on it by talking to people. I learned that with so many people unable to buy houses by themselves, some do it as a team. Relatives and nonrelatives alike sometimes go together to buy their homes."

Intrigued by this idea, Mary Mills called her daughter-in-law. Yes, she, too, wanted to become a homeowner, but didn't think she could afford it by herself. So together, they contacted Frank to see if he could help them. Well, Frank was the right person to call. Within several months, Mary and her daughter-in-law became first-time homeowners. By combining their incomes, they were able to buy and move into their own duplex. Co-owning can work for homebuyers as well as investors.

Equity Sharing

Although for homebuyers co-ownership usually occurs among family or friends, some Realtors specialize in matching professional investors with homebuyers. This technique is called equity sharing. In exchange for part ownership of a property, tax shelter benefits, and appreciation potential, an investor will contribute a down payment, borrowing power, and sometimes part of the monthly payments. The homebuyer and the investor negotiate the exact terms of the agreement.

Many beginning (as well as seasoned) investors also use a variation of this technique—especially for fix and flip properties. One investor contributes cash and/or borrowing power. The other contributes time and talent.

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