When is a co-borrower helpful…when is it not?

When applying for a home loan there are a few things you should know about borrower vs. co-borrower. Knowing when to use a co borrower can qualify you for a larger loan but it can have its draw backs.

As a rule, lenders use the high income earner as the primary borrower on a loan application. I have had borrowers who think that the high score gets priority. This is only the case on special loan programs usually ranked as subprime. As a result the rate you get for that special provision will be higher than necessary. However, if the is a great disparity between the primary score and the co-borrower score it may be what is needed to get an affordable rate…or qualify at all.

The other consideration is where both borrowers have an ample score but the co-borrowers income is harder to prove. Unless the income is needed to qualify you should avoid using it. The standard debt ratio for most lenders is 38% (as an A paper loan). Above that ratio you start getting into sub prime products. If the primary borrower has the income to support that ratio the loan will be approved in a more timely manner and with less conditions.

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