How to Add an Additional Buyer to a Contract
Understand the role of a co-borrower., Think about what lenders look for in borrowers., Choose a valuable co-borrower., Check credit reports., Contact a lender., Submit a refinance application., Wait for the lender to make a decision.
Step-by-Step Guide
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Step 1: Understand the role of a co-borrower.
When you are applying for a mortgage, you will have the choice of adding additional borrowers to your contract.
Adding a co-borrower to your mortgage gives that co-borrower a legal stake in your home's purchase.A co-borrower is a person who, along with you, will accept responsibility for repaying the mortgage.Adding a co-borrower can help you, the primary borrower, get approved for a mortgage when you have poor credit history or little income., If you are thinking about applying for a mortgage, or refinancing an existing mortgage, you will need to know what lenders expect out of borrowers.
When you and a co-borrower start the application process, a lender will look at the following information:
Credit history, which is the track record you have established over time while managing credit and making payments.Capacity, which looks at your ability to manage payments.Lenders may look at your income, financial stability, and other factors in making this determination.A lender will also look at your debt-to-income ratio ("DTI"), which compares your debt to your before-tax income.Ideally, your DTI should be no higher than 36%.Collateral, which is something you pledge to the lender in case there is a default and you are unable to pay the loan.In the case of a mortgage, your collateral will be the home itself.
Capital, which is any other source of repayment you have besides your income.This may include investments and savings accounts., When you choose a co-borrower, you want to have someone with considerable income and assets.Despite what a lot of people say, having a co-borrower with a great credit score is not necessarily important.This is because most lenders will base their decisions off of the lowest credit score available, so having someone with a high credit score will not necessarily help your chances of being accepted or getting a lower interest rate.For example, let's assume you have a credit score of 680, a monthly income of $5,000, monthly debt obligations in the amount of $2,200, and a DTI of 44%.Let's next assume you have two potential co-borrowers you are looking at.
One co-borrower, Alyce, has a credit score of 670, a monthly income of $6,000, monthly debt obligations in the amount of $1,000, and a DTI of
16.6%.The other potential co-borrower, Bill, has a credit score of 780, a monthly income of $3,000, monthly debt obligations in the amount of $1,000, and a DTI of
33.3%.Between Alyce and Bill, you should choose Alyce to be your co-borrower.
While Bill has a great credit score (100 points higher than yours), Bill does not have much income and his DTI is relatively high.
On the other hand, while Alyce does not have a great credit score, her monthly income is very high and her DTI is very low.
Alyce will be more helpful to you in getting a mortgage than will Bill. , Once you have chosen a valuable co-borrower that will help you get a mortgage or refinance to receive a better interest rate, you will need to look at both of your credit scores before moving forward.While it is not imperative that your co-borrower have an outstanding credit score, it is important that they not have one that is too low.
Generally speaking, your co-borrower should have a credit score that is no more than 20 points lower than your own.The federal government requires that each of the three credit reporting companies provide you with a free credit report once every year as long as you request it.In order to request a copy of your credit report, you can do one of three things.
First, you can visit www.annualcreditreport.com.Second, you can call 1-877-322-8228.Third, you can mail a completed request form to Annual Credit Report Request Service, P.O.
Box 105281, Atlanta, GA 30348-5281., Now that you are ready to apply for a new loan or for a refinance, you will need to either choose a lender or contact your existing lender.
If you are applying for a new mortgage, do some shopping for a lender that will work for you and your co-borrower.
Lenders are salespeople, so it is important to cut through the sales pitch and understand what your best options really are.Try asking friends that have recently gotten a mortgage; ask a financial adviser, an accountant, or an attorney; and search the internet for good options.If you are refinancing, call your existing lender and talk to them about how to start the application process. , If you are going to add a co-borrower to an existing mortgage, you will be required to refinance.A refinance allows you to change the original terms of your mortgage.These changes include the interest rate, the payoff date, the monthly payment, and the names on your mortgage.When you fill out an application, you will be asked to provide your personal information, as well as the personal information of your co-borrower.This will include names, social security numbers, and telephone numbers.Additionally, you and your co-borrower will need to submit copies of tax returns, bank statements, and pay stubs., Once you have submitted your loan application, you will need to wait for the lender's approval.If the lender approves your mortgage application and adds your co-borrower, you both will need to sign the mortgage papers.The new loan, at this point, will replace any old loan you had before. -
Step 2: Think about what lenders look for in borrowers.
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Step 3: Choose a valuable co-borrower.
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Step 4: Check credit reports.
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Step 5: Contact a lender.
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Step 6: Submit a refinance application.
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Step 7: Wait for the lender to make a decision.
Detailed Guide
When you are applying for a mortgage, you will have the choice of adding additional borrowers to your contract.
Adding a co-borrower to your mortgage gives that co-borrower a legal stake in your home's purchase.A co-borrower is a person who, along with you, will accept responsibility for repaying the mortgage.Adding a co-borrower can help you, the primary borrower, get approved for a mortgage when you have poor credit history or little income., If you are thinking about applying for a mortgage, or refinancing an existing mortgage, you will need to know what lenders expect out of borrowers.
When you and a co-borrower start the application process, a lender will look at the following information:
Credit history, which is the track record you have established over time while managing credit and making payments.Capacity, which looks at your ability to manage payments.Lenders may look at your income, financial stability, and other factors in making this determination.A lender will also look at your debt-to-income ratio ("DTI"), which compares your debt to your before-tax income.Ideally, your DTI should be no higher than 36%.Collateral, which is something you pledge to the lender in case there is a default and you are unable to pay the loan.In the case of a mortgage, your collateral will be the home itself.
Capital, which is any other source of repayment you have besides your income.This may include investments and savings accounts., When you choose a co-borrower, you want to have someone with considerable income and assets.Despite what a lot of people say, having a co-borrower with a great credit score is not necessarily important.This is because most lenders will base their decisions off of the lowest credit score available, so having someone with a high credit score will not necessarily help your chances of being accepted or getting a lower interest rate.For example, let's assume you have a credit score of 680, a monthly income of $5,000, monthly debt obligations in the amount of $2,200, and a DTI of 44%.Let's next assume you have two potential co-borrowers you are looking at.
One co-borrower, Alyce, has a credit score of 670, a monthly income of $6,000, monthly debt obligations in the amount of $1,000, and a DTI of
16.6%.The other potential co-borrower, Bill, has a credit score of 780, a monthly income of $3,000, monthly debt obligations in the amount of $1,000, and a DTI of
33.3%.Between Alyce and Bill, you should choose Alyce to be your co-borrower.
While Bill has a great credit score (100 points higher than yours), Bill does not have much income and his DTI is relatively high.
On the other hand, while Alyce does not have a great credit score, her monthly income is very high and her DTI is very low.
Alyce will be more helpful to you in getting a mortgage than will Bill. , Once you have chosen a valuable co-borrower that will help you get a mortgage or refinance to receive a better interest rate, you will need to look at both of your credit scores before moving forward.While it is not imperative that your co-borrower have an outstanding credit score, it is important that they not have one that is too low.
Generally speaking, your co-borrower should have a credit score that is no more than 20 points lower than your own.The federal government requires that each of the three credit reporting companies provide you with a free credit report once every year as long as you request it.In order to request a copy of your credit report, you can do one of three things.
First, you can visit www.annualcreditreport.com.Second, you can call 1-877-322-8228.Third, you can mail a completed request form to Annual Credit Report Request Service, P.O.
Box 105281, Atlanta, GA 30348-5281., Now that you are ready to apply for a new loan or for a refinance, you will need to either choose a lender or contact your existing lender.
If you are applying for a new mortgage, do some shopping for a lender that will work for you and your co-borrower.
Lenders are salespeople, so it is important to cut through the sales pitch and understand what your best options really are.Try asking friends that have recently gotten a mortgage; ask a financial adviser, an accountant, or an attorney; and search the internet for good options.If you are refinancing, call your existing lender and talk to them about how to start the application process. , If you are going to add a co-borrower to an existing mortgage, you will be required to refinance.A refinance allows you to change the original terms of your mortgage.These changes include the interest rate, the payoff date, the monthly payment, and the names on your mortgage.When you fill out an application, you will be asked to provide your personal information, as well as the personal information of your co-borrower.This will include names, social security numbers, and telephone numbers.Additionally, you and your co-borrower will need to submit copies of tax returns, bank statements, and pay stubs., Once you have submitted your loan application, you will need to wait for the lender's approval.If the lender approves your mortgage application and adds your co-borrower, you both will need to sign the mortgage papers.The new loan, at this point, will replace any old loan you had before.
About the Author
Melissa Wood
Melissa Wood is an experienced writer with over 2 years of expertise in lifestyle and practical guides. Passionate about sharing practical knowledge, Melissa creates easy-to-follow guides that help readers achieve their goals.
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