refinancing question

[Homerboy]

My credit is pure crap. There I said it.

But, I have the opportnity to try refinance my primary mortgage and roll in some unsecured debt with an absolute golden co-signer hoping to get a lower rate on the primary (currently at 5.65%) and obviously a much lower rate on the unsecured debt.

What are my chances, how heavily do the lenders take into account the co-signer? Or are they of little concern to the lender and they will only look at my crap score (and thus refuse me).

 

[edro]

I assumed they took the higher of the two (the whole point of cosigning)... but maybe they average them somehow.

Sorry, my reply didn't help at all.

 

[Homerboy]

I assumed they took the higher of the two (the whole point of cosigning)... but maybe they average them somehow.

Yeah that's the question.
I mean obviously the co-signer has to have some weight in the judgment. But is it just a "this guy is spotless... APPROVED!" or is it some "averaging" as you put it.

 

[LucJoe]

It is generally a bad idea to convert unsecured debt to secured debt.

 

[Homerboy]

It is generally a bad idea to convert unsecured debt to secured debt.

While I appreciate your input, we have weighed these issues and this is the best route. To be honest, and in full disclosure, the main part of the "extra money" being rolled into the primary mortgage would be HELOC loan (along with some unsecured debt)

 

[Wyndru]

We just refinanced. My wife and I are both in our 700's so I'm not sure about how much they take into consideration the credit score of the cosigner. I know it mattered as far as joint income, but we almost got denied because of the joint debt too. My wife has a few large loans, and although I thought they wouldn't take her $90,000 school loan into consideration, it was on the paperwork, and the bank said it was close.

 

[highland145]

Luck. Lenders, in general, are way covering their asses. Bought 10ac for $27K, appraised at ~$45K. Had to put 35% down because it's raw land. My fico is 800+.

Maybe your signer could be first on the loan, making sure the pay history is still reported on your credit even though you would be 2nd.

 

[Homerboy]

What I'm hearing here is that this should be an interesting experiment.

 

[highland145]

What I'm hearing here is that this should be an interesting experiment.

Humiliating more likely.

 

[Wyndru]

Humiliating more likely.

Seriously. Good luck.

What pissed me off the most through our refinance was getting denied on a refinance because of my wife's school loan the first time, by the same bank we currently have the loan with.

I kept wondering, we already have the loan with you, nothing major has changed income or debt since we got the original loan, and we want to make our monthly payments lower. This is supposed to make it easier for us to pay it off (i.e. less risk)...why deny us? We currently over pay on each month's payment to pay it off sooner, and have never been late. They are a lot stricter on loans since 3 years ago apparently, or they didn't like us because we were on track to pay off a 30 year in about 23.

We went with a more forgiving bank, and the original bank ended up losing our mortgage all together.

 

[SandEagle]

same bank? they may give you a good rate based on your standing.

in 5 years I was late only 2 times. my credit score is almost in the 500s. my apr%? 3.8% on a 15 yr fixed. plus they removed pmi. lulz

 

[Homerboy]

same bank? they may give you a good rate based on your standing.

in 5 years I was late only 2 times. my credit score is almost in the 500s. my apr%? 3.8% on a 15 yr fixed. plus they removed pmi. lulz

I'll take it to the same bank first of course.
I'm at $135K remaining, but want to bump that up and get a lower rate. If they won't play, I will (try to ) take it elsewhere. I did fall behind with them for a bit, but caught up and am presently current. I'm actually in the process of whating to hear back from them on the MHA (Making Home Affordable) Program, so I'm hoping that is in my favor too as I can say "look... lets start this over now..."

Like I said, my score blows. But co-signer is platinum. I want it in my name primarily due to tax write off and due to the fact the co-signer really wants NOTHING to do with it, except backing me up (if I miss payments he will break my thumbs most likely )

 

[OCGuy]

They will use the lower middle score of the two.

The only thing a "co-signor" is good for is adding income to lower your DTI, but it also adds their debts as well. Also, if they dont live in the subject property, it is considered a non-occupant co-borrower. There are several additional layers of guidelines for this.

<---- Mortgage underwriter

 

[alkemyst]

I assumed they took the higher of the two (the whole point of cosigning)... but maybe they average them somehow.

Sorry, my reply didn't help at all.

They usually pull a tri-score on both borrowers and use the middle scores.

You both usually have to qualify due to the fact that either of you could be liable for the whole deal. Incomes can be added together.

You will want good ratios (under 36% total debt including the new loan).

You will need to have at least some equity though. If you are upside down you will have to put in a down payment. This usually kills a refi deal.

Based on your story, I'd go with the HAMP/HMA programs.

 

[Homerboy]

They will use the lower middle score of the two.

The only thing a "co-signor" is good for is adding income to lower your DTI, but it also adds their debts as well. Also, if they dont live in the subject property, it is considered a non-occupant co-borrower. There are several additional layers of guidelines for this.

<---- Mortgage underwriter

Interesting.
They have 0 debt (not even home from what I understand).
I'm not sure what you mean by "lower middles score of the two" though...

 

[Homerboy]

They usually pull a tri-score on both borrowers and use the middle scores.

You both usually have to qualify due to the fact that either of you could be liable for the whole deal. Incomes can be added together.

You will want good ratios (under 36% total debt including the new loan).

You will need to have at least some equity though. If you are upside down you will have to put in a down payment. This usually kills a refi deal.

Based on your story, I'd go with the HAMP/HMA programs.

HAMP/HMA wont work though as I'm not just trying to refi, I'm trying to refi AND increase the loan.

I'm not upside down on the house. Primary $135K and I'd like to bump to $200K (which would relieve a $65K HELOC). Home worth $240ish. So there's $0K or so in Equity still.

So basically, if I undertand right, they will combine our income and our debts and use that for DTI?

 

[dullard]

Interesting.
They have 0 debt (not even home from what I understand).
I'm not sure what you mean by "lower middles score of the two" though...

The bank gets 3 credit scores normally (there are more, but those are rare for a bank to pay for). The bank will get three for you and three for your co-signer. The bank usually works with the middle score. So if you had a 600, 620, and 650, they work with the middle one, the 620. If your cosigner had a 770, 780, and 781, they'd work with the 780. Those are the middles. I think you can figure out which is the lower of the two middles.

 

[OCGuy]

You:

674 - equifax
675 - transunion - Your middle score, also the lowest middle out of both of you
676 - experian

Co-borrower:

755 - equifax
756 - transunion - co-borrower's middle score, but it doesnt matter since it is higher than yours
758 - Experian

 

[Homerboy]

The bank gets 3 credit scores normally (there are more, but those are rare for a bank to pay for). The bank will get three for you and three for your co-signer. The bank usually works with the middle score. So if you had a 600, 620, and 650, they work with the middle one, the 620. If your cosigner had a 770, 780, and 781, they'd work with the 780. Those are the middles. I think you can figure out which is the lower of the two middles.

 

[Homerboy]

You:

674 - equifax
675 - transunion - Your middle score, also the lowest middle out of both of you
676 - experian

Co-borrower:

755 - equifax
756 - transunion - co-borrower's middle score, but it doesnt matter since it is higher than yours
758 - Experian

Got it now (thanks to all 3 of you that explained it). Honestly I should have realized what you meant when I 1st read it.

If they are just using the lowest of the middle then, how does the co-signer play into the equation though if his score is just tossed out?

Lets say his income is $1M/year mine is a shit-ton less. That's gotta count for something right?

 

[OCGuy]

Got it now (thanks to all 3 of you that explained it). Honestly I should have realized what you meant when I 1st read it.

If they are just using the lowest of the middle then, how does the co-signer play into the equation though if his score is just tossed out?

Lets say his income is $1M/year mine is a shit-ton less. That's gotta count for something right?

Yes, they will take into account the income, so you would qualify for a higher loan amount. This does not effect your rate in any way though.

If they dont live in the house with you, you have to go FHA or Freddie Mac in order to not take a non-owner occupied hit on your rate, which can be very expensive.

 

[dullard]

Lets say his income is $1M/year mine is a shit-ton less. That's gotta count for something right?

In that case, the co-signer should pay off your mortgage and you should have a separate agreement to pay him back. Problem solved. Why include the middle man (ie the bank) in that extreme case?

 

[Homerboy]

In that case, the co-signer should pay off your mortgage and you should have a separate agreement to pay him back. Problem solved. Why include the middle man (ie the bank) in that extreme case?

Because then I cant deduct interest. Any interest on the loan he gives me he'd have to report as income. He couldn't/wouldn't give me as good of a rate as the banks could (hopefully) and the biggest item being is he just "doesnt want to deal with it... period". I can't look a gift horse in the eye. I gotta go with what he wants.

 

[Homerboy]

Yes, they will take into account the income, so you would qualify for a higher loan amount. This does not effect your rate in any way though.

If they dont live in the house with you, you have to go FHA or Freddie Mac in order to not take a non-owner occupied hit on your rate, which can be very expensive.

Gotcha. Well we'll see what happens. OCGuy should I submit paperwork to you? You wanna underwrite this!!?!?

 

[alkemyst]

Yes, they will take into account the income, so you would qualify for a higher loan amount. This does not effect your rate in any way though.

If they dont live in the house with you, you have to go FHA or Freddie Mac in order to not take a non-owner occupied hit on your rate, which can be very expensive.

Not to mention a cash-out refi is one of the hardest things to qualify for right now.

OP, what are you planing to use the extra cash for?

To refi out the 2nd/HELOC is not that hard, but many banks are leery of cashing out equity esp to those that showed poor repayment histories.

I am assuming that you are talking $135k for the first and $65k for the second...then the CC's...if you have $40k in CC bills...it's going to be done like a cash-out refi and you will have the best chances if you allow them to cut the checks to the creditors directly, but they may want you to close those accounts in return.