How Can You Apply for a Home Loan with Low Credit Score?

If you are hesitant on applying for a loan because of your poor credit history, don't worry, there is still a way for you to borrow funds to finance your home purchase. In the instance that the borrower is not qualified to be granted a loan, a mortgage lender may ask the loan applicant to provide a co-signer or a co-borrower in order to proceed with the loan.

What is a co-signer? A co-signer is a person who provides guarantee that a loan will be repaid.  The guarantee provided by the co-signer reduces the risk that the lender will lose the money lent to the borrower.  The co-signer signs an agreement stating that in case the borrower, fails to make the payments, he/she will assume legal liability for it.  However, they do not have ownership of the property, the co-signer is just there to insure the loan will be repaid. They only pay if the borrower fails to make the payments. The income, assets and credit history of both parties are considered by the underwriter to approve the loan. Co-signer is often a relative or a friend of the borrower.

What is a co-borrower? A co-borrower is essentially the same as the borrower. He/she is responsible for half of the payments all through the length of the loan.  Co-borrowers are usually spouses or partners who use their combined income to qualify for a larger mortgage than could be obtained singularly.  By being a co-borrower they also have part ownership of the property.  The income, assets and credit history of both parties are also considered by the underwriter to approve the loan.

If you have any questions on how to apply for a loan with a co-signer or a co-borrower, please contact me.