Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
By Shmuel Shayowitz
A panicked call from a client late one evening revealed he was under enormous pressure because of a possible work emergency that would call him out of town. We were all set for the closing on his home purchase, which was previously confirmed, twelve days from the date of our call. Packing, moving, liquidation of closing funds, and many other meticulous items were diligently prearranged many weeks in advance. Everything was accounted for … except this sudden work catastrophe.
I calmed him down by giving him a quick lesson on a myriad of emergency closing tactics. While I can’t say that I have experienced every closing calamity known to man, I am confident that I have a solution in my arsenal for pretty much every scenario. For starters, I offered to expedite the closing and committed to having everything done before he had to leave. It would require swift action by all the parties to the transaction, but I was confident we could get it done. Then I mentioned, he really didn’t have to worry because he had “a significant other.”
As the header indicates, “sign if I can’t” is a great built-in perk that can be utilized when needed. Of course, you have to have professionals who know what they are doing and a bank that would permit such an exception for the given situation. Believe it or not, many lenders won’t allow it, so cart-blanch permission should not be assumed. Lastly, I called him back later that evening and came up with another solution; We could remove him from the loan altogether as a co-applicant as I would be able to qualify his wife alone.
Just for context – A “significant other” can be helpful to a mortgage candidate in so many ways. Many people are familiar with the traditional term of a “co-borrower” who is a joint applicant on a loan application. A co-borrower shares in both the risk and reward of homeownership, as well as its obligations of repayment. Then there is a “Co-Signer,” who is someone added to a loan application – usually to assist in the mortgage qualification. This would be used when the primary borrower(s) cannot get approved without additional support.
Another example of signing to assist with a loan procurement is that of a “Power of Attorney.” In mortgages, a Power of Attorney (often referred to as a “PoA”) is typically used to execute closing documents on behalf of a borrower who cannot be present at the loan closing. This was the strategy we chose for my anxious client, who was thrilled that all his prearranged plans would not have to be derailed.
While someone who serves as the role of a PoA can be almost any eligible and responsible person, Co-signing on a loan isn’t just a character reference and credit report. Many older homeowners and parents of borrowers remember “the good old days” when if you had good credit and were willing to sign, that’s all that is needed. Aside from being responsible for another person’s debt, a co-signer should expect a rigorous process of paperwork and qualification to ensure they have sufficient income to cover their own debts as well as that of this new mortgage.
Many things should be carefully considered before you sign on behalf of someone else. Over the years, I have provided countless tips for people to protect themselves when acting as co-signers, and I am happy to discuss any specific co-signing, co-borrowing, or power of attorney circumstances that you might be grappling with.
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