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We hope to buy a house before we move. We qualify for the professional loan which interest is higher than normal loans(about 1% more). We are thinking about asking our parents to co-sign the loan. Will it be able to get us to the normal loans? What are pros and cons?
Also, our parents is loaning us downpayment. I heard that it should be report to the lender as a gift? So, it won't affect our loan application and interest rate. Is that right? What type of document do we need for? Having our parents write down that it is a gift?
Sounds like you can not afford a house.
Co-signing a loan is always bad for the person who doesn't get the benefit of the item purchase. They assume all the risk with no recourse and no benefit.
I agree if you are having to borrow the down, get a higher interest rate, and have a cosigner, I would say you aren't ready to buy. Get your credit in order, save a bit of money and buy something you can afford.
It actually is really rare for there to be a co-signer on a house loan. I don't know which types of loans, if any, allow this, because I almost never see it.
If you can find someone to do the loan, there really is no downside to you, the downside is all to the co-signer. There are no pros to the co-signer. As Suzie02 said, they take on all of the liability with none of the benefit. In addition, if you don't make your payment, or pay late, it hurts their credit, even though they didn't know about it.
As for the gift vs loan from the parents, I would be very careful on that. If it really was a loan, and you tell the lender it was a gift, that could be considered loan fraud.
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