Why would an FHA loan require a loan guarantor to also be a party to the deed?
My daughter is buying a house with an FHA loan but does not have enough income to qualify, so she needs me as a co-signer. The loan originator is claiming that, by FHAs terms, if I am co-signing, I must also be a co-buyer (eg. I must also be on the deed and sign the mortgage). I have asked our contact at the originator if they can point to the FHA rule or regulation that requires this and she is looking in to it but hasn't gotten back to me yet.
I don't have a major problem with being on the deed - it won't be a deal breaker. But being on the deed does open additional liabilities for me that don't come with any additional benefits. So if I'm not absolutely obligated to do this, I'd rather pass. Has anyone heard of this or know more about it?
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Do you realize that by being on the loan and if the lender forecloses on it that it still affects your credit? So many people do not realize the responsibility they are taking when cosigning for another person. It is making you responsible for the loan. If your daughter makes a late payment that is 30 days past due then it affects your credit. I hear so many people who have cosigned for someone else crying the blues when they attempt to apply for a loan and their credit score is affected and then claim they only co-signed for someone else and think they have no responsibility at all and that an exception should be made for them. I would think you would want to be part owner of the property. Then it would give you the power to sell it if your daughter fails to follow through on the payments or God forbid something would happen to her. Maybe your daughter really shouldn't be applying for a loan at all until she can truely qualify on her own.
The guarantor (FHA) wants to make sure that everyone on the loan has a stake in the outcome of the loan. Should something happen to your daughter the FHA could be left with a loan which you are responsible for but the home which is now owned by someone else. I suspect that legally they would still be able to foreclose and claim the home but my experience tells me that if the new owner got a good enough lawyer they would have a chance of retaining the home. So the FHA would be left unable to recover. By having all parties responsible for the loan on the deed it puts the bank and the guarantor in a better position to recover should some unforeseeable consequence happen. Even if the FHA allowed it I doubt you would find many banks willing to take the risk either. This is simply the banks way of saying sorry its the rules, even though they would require the same thing.
My daughter is buying a house with an FHA loan but does not have
enough income to qualify, so she needs me as a co-signer.
Unless you are planning on making the payments for the home as well as cosigning if you help your daughter get this home you may be setting her up for failure. The bank is saying your daughter can not afford the home. Surely she may be able to afford to make the payments when everything is perfect. But think back to when you were her age, how often were things not perfect? How tempting was it to make bad decisions that would have solved an immediate need but would have (and may have) resulted in a worse situation overall? When you own a home those temptations seem far more reasonable than if you are just renting. So if you decide to cosign make sure you are involved in her budgeting and payment process until she is in a situation to refinance the home on her own.
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