Will a Co-Borrower Help With a Loan Modification?

If you’re in the process of modifying your home loan and your lender has said that your debt ratios are too high, can you get someone to co-sign with you to help bring those debt ratios in line?

Part of the loan modification review is determining how to get your debt to income ratio within guidelines. If your rates adjusted upwards due to a sub prime hybrid or you’ve lost some or all of your income since you were first approved your lender can try and alleviate the stress by bringing your rate down to get your ratios within guidelines. But the rate can’t be zero. If your debt is greater than your income there’s no practical way to modify a loan.

Additional income from a co-borrower can help but only if the co-borrower was on the original loan. A loan modification truly modifies the original note, it doesn’t replace the current mortgage in the manner a refinance will. If your ratios are way out of line and there’s not enough income, a co-borrower won’t be able to help with a loan modification. And if your debts are truly above your current gross income then there may not be much a lender can do and you’ll need to consider other options such as renting out your property, a short sale or other temporary payment arrangement with your lender.

David Reed