Forgot to post as VANITY. Sorry.
I’d imagine your willingness to cosign would make it a done deal.
However something doesnt add up. If he paid the 2k it would start affecting his credit score within a couple months. However its my bet there is something else going on. A single delinquency doesn’t usually merit a score that low.
These are excellent questions. And I bet Dave Ramsey will give you answers. He is very much against cosigning, so be ready for that. daveramsey.com
Possibly quickly if it's showing on his report as being paid. Being that old, he should be able to settle that debt for at least 30 - 50 cents on the dollar.
PS: With a score that low these days, I doubt they would even give him an application for a mortgage.
....if you did, why would you seek advice?...that alone should answer your question..NO!..
You’ve obviously rationalized why you should do it. What’s the point of giving you advice in how to do it? That’s what the bank will tell you.
Write it up as a 3yr. loan with a balloon payment at the end of the term, which should give the the borrower enough time to refinance and pay you back. Charge a reasonable interest rate to make it worth your while.
If the borrower defaults, you get the property at a pretty good discount.
The oldfashioned way of underwriting a loan when a delinquency shows up is to have applicant pay it off immediately and provide a letter of explanation.
I had a similar thing when I bought my first house, an R-5 writeoff of a medical bill I never received, that was supposedly taken care of by the health insurance plan from two jobs prior. I shpuldn’t have had to pay it since I didn’t really owe it, but if I was going to buy that house it was what I had to do, so I did.
And, here I thought you needed a heimlich!
As all agree, do not co-sign.
Buy the house yourself as an investment - now’s a great time.
Co-signing you are on the hook for the whole nut but have no ownership or control. This gives you both. If your financial situation is strong enough to be a co-signor, it should be strong enough to make the purchase yourself.
Rent it to friend with a lease/purchase agreement, or, just sell it to him when his credit is better.
Co-signing is a solution for lack of income, not for a bad credit score. Your relative still would not be able to get a mortgage loan, except as the other freeper suggested maybe one with a high interest rate. Also, paying off something that’s been on your credit report for 5 years will make your credit score go down not up. That black mark should go off your report after 7 years and the lender won’t even look at that if your history in the last 2 years is good.
Your relative is close to being okay - needs a score of 640 to get an FHA loan and it’s just a function of time to get there. A good website for credit issues is creditboards.com
It’s not a risk at all, if you simply budget for paying for it yourself. Just ensure that you have title rights.
If it is such a deal, why not buy it by yourself? You are going to end up making the payments anyway, so you might as well get your name on the title from the beginning....
I do this for a living.
The lower credit score borrower could not be on the loan; you would need to do it in your name only.
With scores that low; he has some work to do most likely get approved.
General rule is you can co sign to add income; but good credit doesn’t offset bad credit.
Message me if you want more specific info.
If the house is a great deal and you can make the payments, buy it yourself and rent it back to your relative at cost. Your out-of-pocket is unchanged; your future credit rating is completely under your control; and you earn the equity in the property.