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My brother and his wife would like to buy a new house here in MA.
They have a current home, of which they want to keep; so while their credit is ok/good, having that 1st home maxes out their ability to get a loan on their new home. Their real estate agent suggested that they get a partner on their new loan so as to boost their credit.
They came to me to become the co-borrower on their new home loan, of which I was concerned about because I want to be able to get my own condo pretty soon and set up my own life, so to speak, in the future.
Their solution to my worries is that as new home owners they will be given an option at the 6-month mark to refinance their home ( mind you, on their current home they have already taken out a loan). Their plan at that time will be to remove my name and credit from the agreement and they will assume the house and the loan on their own.
I would like some perspective on this, of course for the protection of myself but also for my brother and his family ( his daughter is heading off to college soon), because while they seem to have everything all worked out, everything always feels good or seems to work 'in theory'
I can honestly admit that I dont know loads about how mortgages work but If they were unable to manage 2 mortgages now ( according to the bank and real estate agent) why would six month make any difference? Are banks/lenders obligated to accept the terms of your refinancement as a new home owner? Is there a possibility that they willnot be given a refinancement in 6 months?

jameshogg · Posted: Tue Feb 08, 2011 11:00 pm Post subject:

Hi Biname,

If your brother and his wife is able to refinance the mortgage within 6 months time period, then there won't be any problem for you. But if the property value decreases within this 6 months time period, then your brother and his wife won't be able to refinance the mortgage and as a cosigner, you will also remain liable for paying the dues. In that case, you won't be able to get a new mortgage on your own.

Thanks

Guest

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Guest

Let me be clear, essentially in 6 months after he buys his second home, he is expecting that his credit will look better and seeing as he will have made consistent payments to the home that the lenders will allow the loan to be refincanced under just their names. His income will be the same, he will be in on a whole mortgage and a half on this new one, his daughter is going to college soon so he will be co-signing on her loan in the very immediate future, etc. So based on better credit alone he is hoping to dig himself out of the hole him and his wife have put themselves into with their fisrt home (they find their current mortgage too high and they have already refinanced it once) by devising this plan.

I mean to say that I am not convinced. They are saying that as new home owners they will automatically be given an option to refinance their home, me personally I have never bought a home so I want to know if that's true.
Moreover, I want to know, just because a lender/bank will give you the OPTION of refinancing in 6 months of buying a new home, does that mean they will accept the terms of you refinancement by obligation or can they still deny you the refincancement and demand that you make payments?

I'm just trying to look at both the pros and cons of becoming a co-signer or co-borrower on their mortgage, as well as calculate risks to them.

For instance will my status as a co-borrower/signer effect their credit if mine goes down more? Can I protect them or myself better by becoming a co-signer as opposed to a co-borrower? (what are the differences between the 2)

any help is greatly appreciated

crichter · Joined: 28 Dec 2010 Posts: 34 8.56 Dollars($)

Hi Biname, you can refinance 6 minutes after buying a home. There's nothing magical about 6 months.

For your purposes, there is no difference between co-borrowing and co-signing. You're 100% liable for the debt, own half the asset. It absolutely impacts your ability to buy a new home in the future.

By no means does the opinion of one bank and one real estate agent mean that they can't secure a second loan. They could get a second opinion. However, if the second, third, etc. opinions are all the same, there's nothing that sounds like it is changing in the next six months.

I wouldn't co-sign for someone unless I knew their debt to income and had some idea of whether they'd be able to sustain the payments...have you talked through those numbers?

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