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Co-signer income and fair lending

Question: 
Would you explain, please, the difference (if any) in treating income and debts jointly or separately for co-signers vs. for joint applicants?
Answer: 

First, let’s clear up the basic difference between these two terms which are frequently, and incorrectly, used interchangeably. A co-signer is a person who will be liable on the credit contract but does not receive the benefit of the loan. The co-signer is one who enables the primary applicant to obtain the loan but does not receive or use the loan proceeds or goods purchased with the loan. Now, we can address the equitable treatment of calculating debt-to-income.

Scenario #1 - If you combine income of an applicant and a co-signer who are married to each other for DTI calculation, you must do the same for an unmarried applicant and co-signer.

Scenario #2 – If you combine the income of an applicant and a co-applicant who are married to each other for DTI calculation, you must do the same for an unmarried applicant and co-applicant. You may add a restriction that both applicants either live in the same household or in some way combine daily expenses.

Learn more about Patricia’s webinar Fair Lending Hot Topics - Don't Get Burned!.

First published on 04/17/2016

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