Different Kinds of Co-Borrowers
Co-borrowers can be added onto a mortgage loan for a number of reasons.
Sometimes a borrower cannot document enough income to qualify for a loan by themselves. This can be because they simply do not make enough by themselves for the lender guidelines, or the borrower does not want to document some or all of their income.
The co-borrower can combine their income with the primary applicant's income to achieve a high enough level of compensation to satisfy the lender.
Sometimes a borrower has damaged credit for a variety of reasons, and they need the higher credit of a co-borrower. People's credit can sometimes be damaged for reasons such as a temporary medical emergency, a messy divorce, etc.
A co-borrower with a higher credit score may help the borrower in one of two ways:
qualify for the loan itself
qualify for a better loan rate than the borrower would get by themselves
A co-borrower does not necessarily have to be someone who moves in to the property. In this way you can use a sibling or someone else who lives further away. You don't have to try to convince the lender that your sibling who lives in another state will be moving into the new home you are purchasing. Non-resident co-borrowers are allowed by some lenders but not by others.
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