Conventional Mortgage Loan strategies for best interest rates

[Ramon Garo]

Hi Everyone,

I was recently part of a conversation about people trying to go into a deal together for a single family home. The big question during the conversation is how to make sure that they potential investors would apply for the best rates. I'm relatively new to real estate so I'm hoping you can offer some useful insight.

Applicant 1: Excellent credit, low debt-to-income ratio, upper-middle-class income, very little available cash in bank account (cash is mostly in stock and retirement accounts)

Applicant 2: Mediocre credit, better-than-average debt-to-income ratio, middle-class income, enough cash available to almost buy home outright. This person would be the primary one paying the mortgage and managing the property.

Different Mortgage Loan scenarios

• Applying for loan solo
  
  • Applicant 1 alone
    • This applicant's credit is good enough that they would undoubtedly qualify for the best rates, but since they do not have a lot of cash on hand for a down payment they would need to either cash out some stocks or get a gift from Applicant 2.
      
      My understanding is that either option would lead to tax consequences.
      
      Another option would be to get a low money down payment loan, but then they would have to pay PMI, unless if it could be avoided somehow.
      
  • Applicant 2 alone
    • This applicant would definitely not qualify for good interest rates but they could comfortably put a large percentage down, e.g. 30% ,50% ,70% depending on what they are comfortable with.
• Applying Jointly
  • If both applicants apply together would they qualify for interest rates as good and what applicant 1 could get on their own?
• Co-signing
  
  • Applicant 2 applies with Applicant 1 cosigning
    • In this scenario Applicant 2 qualify for interest rates as good and what applicant 1 could get on their own?