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using a cosigner

my credit took a trashing thru a divorce. late payments (mostly on credit cards/student loans) were regular, but the mortgage always got paid. I have not declared bankruptcy or been foreclosed on. I want to sell my home and downsize, but cannot afford to clean up my credit before I sell/buy. Are there any loan programs (FHA?) that will allow me to use the cosigner to forgive my credit snafus (not a regular situation) and let me put 20-25% down?     
  • January 02 2014 - US
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Answers (8)

Generally, a co-signer is only added to a loan when additional income is needed. A lender is required to use the lower of the scores of all borrowers, so a co-signer would not help in this case.
  • January 03 2014
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Even if you do have a cosigner on your next mortgage application, that unfortunately does not mean that your credit scores will be ignore. Both credit scores of the cosigners on a mortgage application will be looked at and considered by most lenders. What are your exact credit scores anyways? There are lenders like myself that are able to give out loans with scores as low as 580. So if you are above that, then you should have a better chance at obtaining a loan. Otherwise, I recommend that you spend some time building up your credit again. The simplest way to fix your credit is to pay of your debt and revolving credit balance on time. Also, FHA loans only need 3.5% down along with the closing costs. The best thing for you to do is to speak with a lender directly to see if you can get started on financing with your situation. There would only be a few more details needed to sort out your situation. Well I hope this helps! If you have any further questions or if you would like a loan, feel free to contact me.

Good Luck!
  • January 03 2014
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Profile picture for wetdawgs
Sometimes it makes a lot of sense to rent during transitions.  
  • January 03 2014
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Just to make sure everyone realizes, about 1/2 the conventional programs out there allow for a non-occupant co-borrower.  It is a little group everyone may have heard of called Freddie Mac.
  • January 03 2014
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The above answers are true. FHA will allow a co-signer that is not going to live in the home, but your credit score still has to make the cut.

At my savings & loan, we have a portfolio program designed exactly for this scenario. We don't take the borrower's credit score or income into account as long as the co-signer is strong. However, tax liens and judgments would disqualify for this program.

If I were you, I would ask a lender you trust to review your credit as it stands now and give you advice. I would also look for a savings & loan or small bank that might have a similar program in your area.

Good luck on your journey!
  • January 03 2014
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There are some companies that offer FHA loans with scores as low as 580.  I still would reccomend fixing your credit first.  There are great credit companies that will help you restore your credit.  Some companies may charge you a small fee upfront, it may take a few months, but you will see results.  I reccomend doing some research on credit repair companies and shopping around to see whom can offer you the best service.  
  • January 03 2014
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Profile picture for JustinLeffew
Some lenders can go below the traditional 620 FICO on FHA. I myself can go down to 600 though I've seen 580 and lower. As Joe said, your credit will still be used. What will happen is the lender will take the lower of your two middle scores. Certainly though, having a co-signer can help the overall credit risk of the file. Many loans are denied because of "layered risk". There are many different factors involved and the best way to know for sure would be to get Pre Approved with a lender. Your mortgage history will help greatly if you haven't had any lates, as well as having 20-25% down. 

One other thing worth noting: FHA loans allow you to have a non-occupying co-borrower. This means the person on the loan does not actually have to reside in the home. Most conventional loans do not allow this. 
  • January 03 2014
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Using a co-signor whether you are going FHA or Conventional is not designed to get around bad credit.  The loan is still going to be rated by the lower of the two credit scores. Now with your down payment if your scores are just over 620, you can get a loan. If not your only option would be the cosigner to buy the property as an investment property, you move in, and then sell it to you in a year
  • January 03 2014
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