If she's on Medicaid, she doesn't have the funds to back up the loan if you can't pay. I can't believe the lender would allow this if they knew she was a Medicaid recipient. Do they know? It would be unethical to not tell them.
If it were me I wouldn't let her sign even if you could get it past the lenders.
I’m other words, she doesn’t actually own the house but in terms of her financial considerations, I do think entities consider that amount of your house as debt for her. Etc. it’s complicated
If GMA is on Medicaid (either community or Long Term Care) her income and assets must be low enough to for her to qualify. Receiving Medicare is not based on income or assets, but on age (or disabilty in the case of younger people). Perhaps GMA has a good credit rating still because of her past history and this is why you want her to cosign. However, a lender is going to look at the co-signers' income and current assets and I strongly doubt your GMA would meet qualifications to be cosigner for a loan. Were you planing to have her name on the deed or just on the loan? If GMA owns property, other than her own home, that will count as an asset for Medicaid and she could lose coverage.
Her income and assets won't be affected by co-signing the loan. The only thing that will be different is her name will be on a bank loan. She will not have any stake or ownership property. She will be an owner of part of the loan if the primary borrower (the OP) defaults. If she wraps up her own home into a Trust before co-signing on a loan she not only protects it if both parties have to default on the loan, but it also becomes a Medicaid-exempt asset if it's done into an 'Irrevocable Trust'. My husband is a business and finance guy. This is how the rich do it to avoid ever having to pay for anything. The little guy can do it too.
No, its not wise for Grandmom to co-sign a loan. Even if on Medicaid just for health insurance, she gets it because she is low income. In home services, are worse because your only allowed a certain amt of monthly income and assets. If she ever needs Medicaid for Long-term care, co-signing for property will cause a problem.
I think your going to need to find another way to obtain a home. Maybe work to get a bigger down payment. Buy a less expensive house. Please do not drag Grandma into it. As said co-signing means she is responsible for payment if you default.
You don't mention her age, mental or physical status. I think this is a lose lose situation. Save some money and then try on your own. It will be a great accomplishment for you
SP, the predatory lenders are lending again. If you ever want a horror story, take a read over in Reddits financial subgroups. Feels like 2008/2009 with predatory lending practices. Many astounding ?’s from grandkids in this position…. non traditional lenders got them to get the grands to be co-signers for cars, home, private student loans. That no worries as you will get a fabulou$$$ career once you graduate / get your first big job, so you will never default & will never b an issue for grannie. The who “she will not be paying any money”. Then it changes. A lot of adjustable rate mortgages no longer affordable as went from 3-4% to 8-9% and they can’t make that payment. But in addition to the grands being a co-signer, they also have allowed by signing the paperwork to have their home to be placed as cross collateralization. So not only is the house with the ARM mortgage collateral but also the grandparents home is cross collateralized to the lend as well. It’s touted to those who really cannot get qualify for a mortgage from a regular lender ever.
Bad idea all around as others have said. You and your GMA really need to get with a competent attorney licensed in the state where you both live (two attorneys if you live in two different States, as each State laws/regs are different). A elder care, estate planning and tax experienced attorney is what you need, as there are MANY LEGAL complications herein depending on her status (Medicaid long term care (aka permanent skilled nursing home care or low income individuals) OR "regular" Medicaid general health coverage for low income individuals? What if any assets does she have, a home or what/how can she co-sign any loan, and ANY reputable lender would accept her given she MUST be low-income if on any type of Medicaid. Does she have a durable power of attorney (who is that?), what are her end of life financial documents (Will, Trust, on and on)....
All that aside, having someone else co-sign a mortgage loan -- even if a lender allows it - is REALLY a bad idea especially given all the potential legal ramifications if she passes or becomes incompetent (dementia) and if you lack all the properly executed LEGAL documents that give you control of the property you are buying.
GET WITH A lawyer before doing anything. NOT KNOWING is not a defense, and there are many downstream legal considerations you both need to be fully aware of. YES this will cost money to hire the right types of lawyers for YOU BOTH for you and for your GMA so you each have proper representation BEFORE doing anything.
No. She will not be affected. Your grandmother being a co-signer on a loan only means that she has better credit than you do. It does not mean that her income will be increased or that her own assets will be personally enriched by it.
You do know that is for some reason you default on the loan, even if it is through no fault of your own like you lose your job or can't work, your grandmother will be on the hook for the payments.
On the other hand, if she's already on Medicaid she probably doesn't have much other than good credit. If such is the case and she owns a home, her house should be put into what is called an 'Irrevocable Trust'. This means she can live in her home for life and it will also be an exempt asset from Medicaid should she need to go into care at some point. The home can remain in her family at the discretion of whoever she puts as Trustee. The place can't be sold though. If it is, then creditors, Medicaid, or debts she had will be submitted to the court and paid out of the proceeds. It could be rented though.
This is how rich people avoid having to pay anything on huge estates and inheritances. This is how they screw the system to get free care for their elderly "loved ones" even when paying for it will cause them no financial hardship. So, why can't a regular person like you get a taste to live the American dream and own a home?
Talk to an estate lawyer, they'll explain all about it. Good luck, I hope you get your home.
Anything moved into a trust within the last five years usually is considered a countable asset by Medicaid. At least that is the way it is in our state.
She probably can do what she wants while on Medicare. The question would be with Medicaid since it is need based.
Paying or not, when someone cosigns they are a responsible party for the property. With that comes benefits for you but also lots of risks for both parties.
We refused to co-sign on a car for our son because the car he picked out was out of our price range. We knew we could not afford to make the payments if he defaulted and that is exactly what your grandmother would be saying.
Life is fragile and hard enough to be accountable for our own responsibilities. Anything can happen to you at any moment from losing a job, going on disability, or even death. Do you really want to saddle her with the responsibility of your managing, selling, etc. your home if something happens to you.
Like others have said, she probably would not even be approved to co-sign if she is on Medicaid. Even if she has money tucked in a trust, that money belongs to the trust not her and probably can not be considered as an asset for her to be considered a good credit risk.
It would probably be best to tell her thank you for the offer as it probably means a lot to her, but then tell her No Thank you.
Medicaid is usually for poor people. The bank wants a cosigner because they think you won't pay. When you don't pay, they'll go after the cosigner. Even if they cannot get anything from the cosigner, the bank will attempt to collect. My aged mother in law is experiencing this, and the calls make her miserable, her relationship with the family member she cosigned for had been damaged, and her disabled senior daughter is left with the messy finances and trying to hide some of Mom's money from the collectors but that's another discussion. Is this what you want for Grandma? I recommend only buying what you can afford.
No, that is not why the bank wants a co-signer. They may want one because the OP could have had bad credit in the past. The grandmother may be poor and on Medicaid but have excellent credit. Like my mother. She is low-income and on Medicaid but she has excellent credit.
Burnt Caregiver. Our opinions differ as does the information I have on hand. I cannot respond directly as this system here is not allowing me to do so:
"Public assistance, also known as welfare, provides eligible individuals with financial aid. Programs such as Medicaid provide health care insurance to qualifying individuals and families. Benefits are available through the Social Security Administration. Identification: Medicaid is a federal public assistance program that offers medical and medically related services to low-income women, children, elderly people and individuals with disabilities. According to the PolicyAlmanac.org, "Medicaid provides supplemental coverage for low-income Medicare beneficiaries for services not covered by Medicare (e.g., outpatient prescription drugs) and Medicare premiums, deductibles and cost sharing."
Medicare is a medical insurance for retired people and it has nothing to do with anyone’s finances. Regardless of whether you are poor or rich, anyone can qualify for Medicare when they reach 65 years of age if they worked in the US. Medicaid, on the other hand, is a needs-based program administered by the federal and state government and funded by taxpayers’ dollars. I do not believe that receiving Medicaid will affect your grandmother’s benefits if she co-signs on a loan. It seems that your grandmother has good credit and may qualify for a loan. However, the bigger question will become if your grandmother co-signs on the loan to purchase this house if you were to renege on the mortgage payments will your grandmother be able to make the payments since she has limited income? In order for your grandmother to qualify for Medicaid, she must have very limited income and resources. Since your grandmother has limited income, she might not even qualify for a loan. Also, depending on your grandmother’s age, she might not qualify for a loan as lending institutions do not want to give loans to people in their 80’s and 90’s.
If for some reason the OP has to default because they cannot make the payments and the grandmother cannot either, then grandma files for bankruptcy. Businesses and rich people do this all the time.
That's how this works.
And yes, everyone already knows that Medicaid is funded by "taxpayers" dollars. So is every government-insured load that big business people default on every day. Every multi-million and billion dollar subsidy big business collects on every day is funded by tax payer money.
So please, do not give us all a lecture here on what the taxpayers fund. I've paid taxes since I was a teenager and never had a deduction. I don't complain though.
I hope the OP can get their home. I love it when the little guy can get a taste every now and then.
The OP should make sure they insist on a fixed rate though and not a variable because the interest on the payments can go out of control.
Grandmother should not cosign. Could fall back on her and hurt her getting benefits. She cannot pay your mortgage or she would not be in Medicaid. Surprised the bank would take her as cosigner.
My answer is to never ever ever co-sign a loan for anyone. This is how relationships become disasters. Why is an aged grandma the only person available to help? Is there a problem with your credit score? Are you gainfully employed? Have you saved a 20% down payment? Regardless of grandma’s credit score, the fact that she is on Medicaid should tell you that she has a very low income and shouldn’t co-sign any loans.
Seek a different co-signer. If she’s on Medicaid, she is considered to be below the poverty line. Who would loan to someone considered living below the poverty line? Seek a different co-signer for your loan.
Possibly. If she is on Medicaid, her ability to pay might not help you get the loan. In addition, what one state counts might be different than what another state counts.
I would thank your Grandma for her generosity and seek a different co-signer or try to apply for the home or a smaller place on your own.
Even if your grandma has great credit, what major lender would allow someone on Medicaid with limited income be a co-signer?
Sure a predatory lender would be all for it, but they probably would not even give you a solid rate, and my guess if you need a co-signer which means either house is outside your price range, or your debt to income ratio is dog water. Should you even be looking to buy a house at this point?
Fix your credit first tbh, say thanks to grandma but don't have her co-sign knowing full well if you default your grandma cannot cover your payments. Defeats the whole purpose of a cosigner.
If you default on the loan, she will be just as responsible as you for the payment. Her signature is not just borrowing her credit for you to get a loan, she will be signing that she is responsible. If she's eligible for Medicaid, that means her income is very low so it may not help much in regard to getting credit.
If you have enough income on your own to cover a house payment, check out your own credit history to see if there is anything on your report that should not be there. Otherwise, it might be in your best interest to find an owner finance place.
I would think the home - deed will be in both of your names as well. Are y'all planning to live together in the house? You probably need to talk to an elder attorney in the state where g'ma lives to give you facts about how her loan and her Medicaid will work.
The bank wants you to get a co-signer, as they feel you are a risk of not being able to make the payments. If I were you, I'd hold off, pay off all your debts, then save up more money for a house and wait until you do not need a co-signer, and can comfortably make the payments. Buying a house when you either owe other debts, or can barely make the payment is not a blessing to you, or others.
We may not like to hear "No", but banks are a pretty good judge on if someone can or can't pay a loan. PLEASE don't drag your relative into something where they might be on the hook when you can't pay. It happens all too often that there are the best of the intentions, and a co-signer's life becomes a living hell because of it.
I doubt that a bank would accept someone co-signing a loan who is on medicaid. The fact they are on medicaid means they have no job and no assets for the bank to attach if you are unable to make your mortgage.
This is a question better put to your banker first.
Why do you need a cosigner on the loan? It's usually an indication that you are taking on too much debt relative to your assets/income.
If you default, GMA will be responsible to pay. Does she have the funds to do that,?
If it were me I wouldn't let her sign even if you could get it past the lenders.
As others have mentioned, if she is on Medicare and Medicaid, she won’t qualify to be a co signer.
Her income and assets won't be affected by co-signing the loan.
The only thing that will be different is her name will be on a bank loan.
She will not have any stake or ownership property. She will be an owner of part of the loan if the primary borrower (the OP) defaults.
If she wraps up her own home into a Trust before co-signing on a loan she not only protects it if both parties have to default on the loan, but it also becomes a Medicaid-exempt asset if it's done into an 'Irrevocable Trust'.
My husband is a business and finance guy. This is how the rich do it to avoid ever having to pay for anything. The little guy can do it too.
And should.
I think your going to need to find another way to obtain a home. Maybe work to get a bigger down payment. Buy a less expensive house. Please do not drag Grandma into it. As said co-signing means she is responsible for payment if you default.
In either case IMO it is a real bad idea.
Medicaid is not welfare.
I doubt with her financial destitution she would be a qualified cosigner but stranger things have happened.
But in addition to the grands being a co-signer, they also have allowed by signing the paperwork to have their home to be placed as cross collateralization. So not only is the house with the ARM mortgage collateral but also the grandparents home is cross collateralized to the lend as well. It’s touted to those who really cannot get qualify for a mortgage from a regular lender ever.
“She will not be paying any money”… if only…
All that aside, having someone else co-sign a mortgage loan -- even if a lender allows it - is REALLY a bad idea especially given all the potential legal ramifications if she passes or becomes incompetent (dementia) and if you lack all the properly executed LEGAL documents that give you control of the property you are buying.
GET WITH A lawyer before doing anything. NOT KNOWING is not a defense, and there are many downstream legal considerations you both need to be fully aware of. YES this will cost money to hire the right types of lawyers for YOU BOTH for you and for your GMA so you each have proper representation BEFORE doing anything.
It does not mean that her income will be increased or that her own assets will be personally enriched by it.
You do know that is for some reason you default on the loan, even if it is through no fault of your own like you lose your job or can't work, your grandmother will be on the hook for the payments.
On the other hand, if she's already on Medicaid she probably doesn't have much other than good credit. If such is the case and she owns a home, her house should be put into what is called an 'Irrevocable Trust'. This means she can live in her home for life and it will also be an exempt asset from Medicaid should she need to go into care at some point. The home can remain in her family at the discretion of whoever she puts as Trustee. The place can't be sold though. If it is, then creditors, Medicaid, or debts she had will be submitted to the court and paid out of the proceeds. It could be rented though.
This is how rich people avoid having to pay anything on huge estates and inheritances. This is how they screw the system to get free care for their elderly "loved ones" even when paying for it will cause them no financial hardship.
So, why can't a regular person like you get a taste to live the American dream and own a home?
Talk to an estate lawyer, they'll explain all about it. Good luck, I hope you get your home.
Paying or not, when someone cosigns they are a responsible party for the property. With that comes benefits for you but also lots of risks for both parties.
We refused to co-sign on a car for our son because the car he picked out was out of our price range. We knew we could not afford to make the payments if he defaulted and that is exactly what your grandmother would be saying.
Life is fragile and hard enough to be accountable for our own responsibilities. Anything can happen to you at any moment from losing a job, going on disability, or even death. Do you really want to saddle her with the responsibility of your managing, selling, etc. your home if something happens to you.
Like others have said, she probably would not even be approved to co-sign if she is on Medicaid. Even if she has money tucked in a trust, that money belongs to the trust not her and probably can not be considered as an asset for her to be considered a good credit risk.
It would probably be best to tell her thank you for the offer as it probably means a lot to her, but then tell her No Thank you.
The bank wants a cosigner because they think you won't pay.
When you don't pay, they'll go after the cosigner.
Even if they cannot get anything from the cosigner, the bank will attempt to collect. My aged mother in law is experiencing this, and the calls make her miserable, her relationship with the family member she cosigned for had been damaged, and her disabled senior daughter is left with the messy finances and trying to hide some of Mom's money from the collectors but that's another discussion.
Is this what you want for Grandma?
I recommend only buying what you can afford.
No, that is not why the bank wants a co-signer. They may want one because the OP could have had bad credit in the past.
The grandmother may be poor and on Medicaid but have excellent credit. Like my mother. She is low-income and on Medicaid but she has excellent credit.
"Public assistance, also known as welfare, provides eligible individuals with financial aid. Programs such as Medicaid provide health care insurance to qualifying individuals and families. Benefits are available through the Social Security Administration.
Identification:
Medicaid is a federal public assistance program that offers medical and medically related services to low-income women, children, elderly people and individuals with disabilities. According to the PolicyAlmanac.org, "Medicaid provides supplemental coverage for low-income Medicare beneficiaries for services not covered by Medicare (e.g., outpatient prescription drugs) and Medicare premiums, deductibles and cost sharing."
If for some reason the OP has to default because they cannot make the payments and the grandmother cannot either, then grandma files for bankruptcy. Businesses and rich people do this all the time.
That's how this works.
And yes, everyone already knows that Medicaid is funded by "taxpayers" dollars. So is every government-insured load that big business people default on every day.
Every multi-million and billion dollar subsidy big business collects on every day is funded by tax payer money.
So please, do not give us all a lecture here on what the taxpayers fund. I've paid taxes since I was a teenager and never had a deduction. I don't complain though.
I hope the OP can get their home. I love it when the little guy can get a taste every now and then.
The OP should make sure they insist on a fixed rate though and not a variable because the interest on the payments can go out of control.
If the OP has to operate the way wealthy businesses and individuals do to realize that dream, then I say more power tp them and best of luck.
~BC 8/10/23
Why is an aged grandma the only person available to help? Is there a problem with your credit score? Are you gainfully employed? Have you saved a 20% down payment?
Regardless of grandma’s credit score, the fact that she is on Medicaid should tell you that she has a very low income and shouldn’t co-sign any loans.
I would thank your Grandma for her generosity and seek a different co-signer or try to apply for the home or a smaller place on your own.
Sure a predatory lender would be all for it, but they probably would not even give you a solid rate, and my guess if you need a co-signer which means either house is outside your price range, or your debt to income ratio is dog water. Should you even be looking to buy a house at this point?
Fix your credit first tbh, say thanks to grandma but don't have her co-sign knowing full well if you default your grandma cannot cover your payments. Defeats the whole purpose of a cosigner.
If you have enough income on your own to cover a house payment, check out your own credit history to see if there is anything on your report that should not be there. Otherwise, it might be in your best interest to find an owner finance place.
I would think the home - deed will be in both of your names as well. Are y'all planning to live together in the house? You probably need to talk to an elder attorney in the state where g'ma lives to give you facts about how her loan and her Medicaid will work.
We may not like to hear "No", but banks are a pretty good judge on if someone can or can't pay a loan. PLEASE don't drag your relative into something where they might be on the hook when you can't pay. It happens all too often that there are the best of the intentions, and a co-signer's life becomes a living hell because of it.
This is a question better put to your banker first.