Interest rate with cosigners

2 Replies

Hi BP! I'm excited to finally have my first question after a few months of poking around BP and trying to educate myself! 

SO, we are trying to get into the RE market in Flagstaff, Arizona. This is a very small market with little to offer in our modest price rage and average credit scores. 

Our parents offered to help us get started by including themselves on the loan. They have great credit and little debt to income ratio. Even including them the lender is offering us a 5.125% interest rate.. I was under the impression that the interest rate is affected by a median of the combined credit scores? The lender is telling me that we are unable to get a better interest rate due to the lowest credit score that would be included on the loan. Something about that isn't clicking for me. Could anyone fill me in on either what bit of the puzzle I'm not seeing, or if I just need to shop other lenders? 

I'm also wondering if it would make sense then to just remove the person with the lowest credit score from the loan? 

Thanks so much!  

Originally posted by @Brandi Lamb :

Hi BP! I'm excited to finally have my first question after a few months of poking around BP and trying to educate myself! 

SO, we are trying to get into the RE market in Flagstaff, Arizona. This is a very small market with little to offer in our modest price rage and average credit scores. 

Our parents offered to help us get started by including themselves on the loan. They have great credit and little debt to income ratio. Even including them the lender is offering us a 5.125% interest rate.. I was under the impression that the interest rate is affected by a median of the combined credit scores? The lender is telling me that we are unable to get a better interest rate due to the lowest credit score that would be included on the loan. Something about that isn't clicking for me. Could anyone fill me in on either what bit of the puzzle I'm not seeing, or if I just need to shop other lenders? 

I'm also wondering if it would make sense then to just remove the person with the lowest credit score from the loan? 

Thanks so much!  

It is complicated but you basically just need the number of people on the loan that have sufficient credit scores and income to get the financing you need. For instance, if Dad has income and great credit and husband has great income and great credit, you use them. All four (mom, dad, husband, daughter) can be on Title (ownership) even though only Dad and husband on are the Loan. They are TWO different things. People often get confused on this one. Ownership and loan liability do not have to match. When I was doing financing, sometimes there would be 5 people on the loan and 3 people the title or 1 person on financing and two people who owned the property. There are a gazillion ways to do it.

Check out 1st Bank in Phoenix. There may be a branch in Flagstaff. They are investor friendly. By the way, you can buy houses without credit and without a bank. It is called "Subject To" and Wraps, and is what I choose to do instead of using banks.

Thank you. This does clarify some things for me. The lender never offered any alternative ways to figure the financing. I guess I've got some lender shopping to do. Thanks again. 

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