Home Purchase Mortgage Calculators
Mortgage Program Calculators
The situation you described may not be fair or practical but it is consistent with lender guidelines. When you apply for a mortgage, lenders use all monthly debt obligations an applicant is responsible for including mortgage, property tax, homeowners insurance, credit card, student and car loan payments. The lender then uses the monthly gross income figure for all applicants to calculate the debt-to-income ratio used to determined what size loan you qualify for. We provide a comprehensive overview of the debt-to-income ratio for a mortgage on FREEandCLEAR.
If you are listed on a mortgage, even as a co-borrower with a relative, then that monthly payment is factored into your debt-to-income ratio when you apply for another loan. With a debt-to-income ratio, the higher the debt expense you have, the lower the mortgage amount you can afford. Even if you do not make the monthly payment on the other mortgage and you are a co-borrower on paper only, lenders include it in your debt-to-income ratio because you are legally responsible for that mortgage. For example, if your relative loses his or her job, you may be required to make that mortgage payment. I am not suggesting that is going to happen but that is the position lenders take from a risk standpoint.
The only way to have to have your relative's income included when you apply for the other loan is to have him listed as a co-applicant on the loan application and co-borrower on the loan. If he or she is listed as a co-borrower, the lender also includes his or her monthly gross income (and debt) to determine what size loan you qualify for. Assuming your relative does not have excessive non-mortgage monthly debt (e.g. credit card, car and student loans), his or her income should offset the extra mortgage expense the lender includes in your debt-to-income ratio and help you qualify for larger loan amount. But to reiterate, the only way the lender will include income from an additional individual, such as your relative, is if that individual is a co-applicant and co-borrower on the loan.
To summarize, if your relative agrees to be a co-borrower you should be good to go with the other loan. If he or she does not agree to be a co-borrower, then the mortgage you have together will be factored into your debt-to-income ratio but his or her monthly gross income will not. Although this approach may not seem fair, this is how lender underwriting policies apply to your situation.