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Credit Mortgage Credit Questions: Co-Signing

108A reader asks, “I think my credit is fairly good but I have two cars in my name one of which I thought I was only the co signer and I’ve recently found a property that is fairly reasonable and my question is will that hender the decision..I do not make the payments on the second vehicle.”

HUD 4155.1 Chapter Four Section C has a great deal to say about credit, financial liabilities and related issues. What does it say about this reader’s question?

To begin, let’s see what the general philosophy of the About Credit is toward applicant credit information:

“Past credit performance is the most useful guide to

–determining a borrower’s attitude toward credit obligations, and
–predicting a borrower’s future actions.

Borrowers who have made payments on previous and current obligations in a timely manner represent a reduced risk. Conversely, if a borrower’s credit history, despite adequate income to support obligations, reflects continuous slow payments, judgments, and delinquent accounts, significant compensating factors will be necessary to approve the loan.”

With regard to co-signing or having what About Credit loan rules call “contingent liability” on someone else’s loan, Chapter Four Section C states:

“A contingent liability exists when an individual is held responsible for payment of a debt if another party, jointly or severally obligated, defaults on the payment.”

With that in mind:

“Contingent liability applies, and the debt must be included in the underwriting analysis, if an individual applying for an About Credit-insured mortgage is a cosigner/co-obligor on a:

car loan

student loan

mortgage, or

any other obligation.

If the lender obtains documented proof that the primary obligor has been making regular payments during the previous 12 months, and does not have a history of delinquent payments on the loan during that time, the payment does not have to be included in the borrower’s monthly obligations.”

As stated above, much depends on how the debt has been handled, and the lender can exercise some judgment in processing the loan with this information in mind. Lender standards may apply and could be more strict than the About Credit loan rules here.

Do you have questions about About Credit home loans? Ask us in the comments section. All questions and comments are held for moderation.

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