Can I Get a Cosigner for a Jumbo Mortgage?

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Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

Can I Get a Cosigner for a Jumbo Mortgage?

 

Parents have been helping their kids buy homes since, I'd guess, kids have been buying homes, but in today's lending environment, it's important that both borrowers and real estate professionals avail themselves of the most current options, advantages and guidelines.  After all, knowledge is power and there are really only two main approaches, gift funds and co-signing, that come into widespread use when we talk about introducing family help into the mortgage approval process.

 

Gift Funds

Borrowers of all stripes use gift funds and do so far more often than the general public would estimate.  But on the other hand, don't let any preponderance of gift fund use lull you into thinking that there are no restrictions.  Indeed, gift funds, for the vast majority of loan programs, MUST come from a family member.  So a gift from a friend isn't really a gift at all and could constitute a source of funds that is not allowed for the buyer.  Yes, I realize that FHA loans will allow gifts to come from close relationships other than blood, but remember, I said "vast majority" of programs --- not all programs.  Gift funds may also be limited to a certain percentage of the overall down payment, within the constraints of the loan structure.  So, for example, the buyers themselves may be required to put 5% or 10% of the purchase price into the transaction of their own funds, regardless of the donor's largesse.  We see this with some jumbo loan options.  Lastly, gift funds cannot be used for reserves with virtually all lenders and programs.

 

Cosigners or Cosignors or Co-signers or...

Whereas gift funds will solely help a borrower with the "asset" piece of a qualification --- and all approvals are a combination of income, assets and credit --- adding a cosigner could potentially help with both the income AND the assets, if necessary.  But first, let's acknowledge that a cosigner is really, in lender-speak, a "non-occupant co-borrower."  This is translated as, "someone who is going on the loan application but who doesn't plan to live in the home."  Sounds about right for those parents who will participate in the loan process with a child in order to lend both assets (in lieu of a gift) and income (to help with the debt-to-income ratio).  Good candidates for non-occupant co-borrowers need not be family, but they should have a very strong debt-to-income profile of their own as they will be parlaying their surplus income to aid the primary borrowers/occupants.  And while we're on the topic of what makes a good cosigner, let's accept that cosigners cannot be brought onto a loan application to offset a credit challenge from any other borrower on the application.  We lenders generally grade the file by the lowest middle FICO score of all applicants.  Lastly, non-occupant co-borrowers are permitted on conforming, FHA and even jumbo loan programs (along with others).

 

Family help with a home purchase goes back generations, but nowadays it can also go forward.  A new trend we're seeing is that of working children gifting and co-signing for their elderly parents.  There's no rule that says when it comes to age, these benefits can only go in one direction.  So keep all of these approaches in mind if you seek to help someone close to you purchase his or her home.  And if you have questions, let us know.  We may not be family but we'll treat you that way.

 

Una cosa nostra, 

 

 

Robert J. Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 Fax: 415-366-1590
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709
 

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate's Human Resources Department.

 

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood ChicagoIL 60613 - (866) 934-7283

 

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rob spinosa

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Rainmaker
1,027,210
Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.

I must admit this is a scenario that has never ever entered my mind!  Thanks for the excellent info which helped expand my horizons. 

Sep 13, 2018 07:30 AM #1
Rainmaker
1,550,732
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Hi Rob,
Interesting post.  I did not realize co-signor borrowers can't help offset credit challenges of the primary borrower. 

Sep 13, 2018 03:26 PM #2
Rainmaker
251,943
John Henry, Florida Architect
John Henry Masterworks Design International, Inc. - Orlando, FL
Residential Architect, Luxury Custom Home Design

Hello Rob, good to know in my line of business.  People building luxury homes may have a bit more house in mind than wallet will allow.  Thanks.

Sep 14, 2018 04:52 AM #3
Ambassador
4,325,515
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Thanks for the education, Rob. I have worked with several buyers using gift funds, but the co-signing scenario has not come up.

Have a great weekend!

Jeff

Sep 14, 2018 08:36 AM #4
Ambassador
2,101,496
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Timely information Rob. I'm am both gifting funds and cosigning to help my daughter buy her first home. I just sent the lender all of my information yesterday. Waiting to see how much house my daughter can afford. 

Sep 15, 2018 06:04 AM #5
Rainmaker
3,469,712
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Rob, what a great post, I loved it and at the same time miss the interaction we used to have years ago, Endre

Sep 22, 2018 11:07 PM #6
Rainmaker
1,867,149
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

what a nice post - I am working on launching my daughter - my son is fully launched - and then I can wait for them to take care of me! LOL

Sep 24, 2018 07:27 AM #7
Ambassador
3,821,263
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
The right Charlotte REALTOR!

Great information, Rob! You know, I'm in the middle of one that the buyers want to buy before selling so, the parents are paying their downpayment. No co-signing required but, it's nice when family is able to lend a hand when it makes good sense!

Sep 24, 2018 09:28 AM #8
Rainmaker
1,027,570
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Excellent post for anyone looking to add another person to a deed or a loan.  I hope you shared this great post on Linkedin! 

Sep 24, 2018 07:45 PM #9
Rainmaker
814,739
John Juarez
The Medford Real Estate Team - Fremont, CA
ePRO, SRES, GRI, PMN

Signing on to a loan to help another comes with a risk and a burden.

The risk is that the primary lender may not perform. The co-signer may have to make payments. The co-signer often finds out that there is a problem only after the primary borrower is several payments delinquent.

The burden is that the contingent debt is taken into account by new lenders when the co-signer applies for credit on their own account. The potential liability incurred by co-signing may prevent approval of new credit to the co-signer.

Oct 21, 2018 02:40 PM #10
Rainmaker
1,649,532
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, Blackstone Realty Group - brokered by eXp Realty - Kalispell, MT
The House Kat

This is interesting information, especially the new trend of working children gifting and co-signing for parents. Thanks for sharing.

Oct 22, 2018 02:44 AM #11
Rainmaker
643,005
Carolyn Roland-Historic Homes For Sale In Delaware and S. Chester County PA
Patterson-Schwartz Real Estate - Wilmington, DE
Carolyn Roland, GRI, CRS

I recently had a buyer turned down for a jumbo loan because her (non-occupant) brother was giving her gift funds. They need a cheaper house!

Oct 22, 2018 08:44 PM #12
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Rainmaker
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Rob Spinosa

SVP of Mortgage Lending, Marin County
Can I Get a Jumbo Loan with 10% Down?
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