How to Remove a Co-Signer From a Mortgage Loan
When a borrower gets his first mortgage, many times a co-signer is needed to help him qualify. Once the borrower becomes stronger financially, he may want to remove the co-signer from the loan. The only option a borrower has to remove a co-signer for a mortgage debt is to refinance the loan in his name individually. Additionally, the deed to the house itself will have to reflect this change as well.
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Things You'll Need
- 2 months of pay stubs
- 2 months of bank statements (all pages)
- 2 years of tax returns
- Appraisal
- Mortgage loan application
Instructions
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Check your credit report through an online site such as AnnualCreditReport.com. Ensure that there are no errors, and see if there is any way in which your score can be improved. To quickly raise a score, pay down credit card debt to less than 30 percent of the limit.
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Apply for a mortgage refinance with a mortgage lender. Fill out a mortgage loan application and give the lender two months of bank statements (all pages), two months of pay stubs and two years of tax returns. Additional documentation may apply, depending upon the situation.
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Sign any initial disclosures and pay for a property appraisal.
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Allow the appraiser to inspect your property and the lender to check your credit and process your paperwork.
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Sign all closing documents, upon approval, to complete the mortgage refinance process.
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Tips & Warnings
The two biggest indicators for mortgage approval are your debt-to-income ratio and your credit score. To give yourself the greatest chance of being approved, make sure your credit score is at least 620. Additionally, calculate your debt-to-income ratio. Divide all monthly debt payments into your monthly income. If it is less than 36 percent, including your estimated mortgage payment, you will more than likely be approved.
If the co-signer's name is on the deed to your home and you wish to have her removed, you need to file what's called a quitclaim deed with your local register of deeds. By doing so, the co-signer relinquishes her interest in the property. A quitclaim deed does not relinquish the person from financial responsibility from the loan, however, which is why you need to refinance.
If the value of your home has decreased, or you owe a large amount versus the value of the home, it may be hard to refinance your mortgage. Discuss this with your lender before you pay for the appraisal to ensure you do not waste your money on the appraisal.
References
- Photo Credit form -3 image by Rog999 from Fotolia.com
