Non Borrower Contribution: Fill & Download for Free

Nope. You must meet borrower contribution requirements (your down payment) via your own funds or as a gift from a qualified individual or non-profit organization. Seller credits does not qualify for this.

Below is an excerpt from my April research note “Unintentional Costs of Ultra-easy Monetary Policy”QE programs and inequalityQE’s effect on inequality can be seen from the following factors:Central bank’s QE programs rely on the financial sector intermediaries (banks, asset management firms, insurance companies, non-bank financial institutions) to affect the real economyLiquidity (funding) injection from QE purchases would immediately jolt the financial market and facilitate asset price inflation - currencies will depreciate, assets such as equities, bonds (lower rates), real estate, commodities will rallyEffects on the real economy (employment, wages, etc) will come with a (sometimes long and variable) lag, and the potency of such impacts depend on the efficacy of the central bank’s monetary policy transmission mechanism - a partial list can be found hereAsset owners (generally more affluent individuals and large institutions) would be able to see their holdings rise in value (or depreciate less than cash holdings) under QE - they can borrow at lower rates, and their future debt burden would ease in real terms under higher inflation and inflation expectations, which is the often the objective behind QE programsNon-asset holders will face higher rent (which is correlated with real estate prices and housing affordability), lower returns on saving due to lower policy rates and lower term-premium, and a steeper path to asset ownership (they are now more expensive to own)The following chart illustrates the rise in costs of living (medical, rental / housing) relative to nominal wage growth, as well as the declines in home ownership and rental vacancy rates:Policies designed to benefit borrowers over saversU.K. PM May expressed a similar view when speaking at the Conservative Party Conference on October 5th:Because while monetary policy – with super-low interest rates and quantitative easing – provided the necessary emergency medicine after the financial crash, we have to acknowledge there have been some bad side effects.People with assets have got richer. People without them have suffered. People with mortgages have found their debts cheaper. People with savings have found themselves poorer.It is worth noting that the Federal Reserve is no longer expanding its balance sheet, but principals from maturing bonds bought during prior QE programs will be reinvested into new bonds until rate hikes are well underway.ECB President Draghi was asked to comment on PM May’s criticism toward QE, and he vigorously defended the central bank’s policy:On the inequality, we certainly have looked at that, and I think we've discussed that on other occasions. The point is – and there is actually an interesting study by the Bundesbank on whether more generally non-conventional monetary policy measures increase inequality: the answer is, by and large, no. And the reason is that the main source of inequality is unemployment. So to the extent that monetary policy is effective, it will reduce inequality. Although as you buy assets from people who are wealthy in the short run, you certainly increase inequality. But when you look at things over the long run, no, the answer is no. That's what I would say about that.In essence, Mr. Draghi affirmed the immediate effect of asset price inflation (i.e. “buy asset from people who are wealthy”), but he sees such inequality would ease in the long run as improved economic conditions also benefit those who did not benefit from asset markets. In other words, asset owners get a guaranteed boost in the short-run, and others will likely catch up long-run (if all works according to estimates).This view is not unique amongst monetary authorities. Boston Fed President Rosengren recently argued that Fed policies are borrower friendly, since borrowers contribute more to economic growth than savers:There are distributional effects that occur with monetary policy. When we lower interest rates, there are definitely some people worse off. The people that are worse off are people that are saving. But the people that are better off are the people who are borrowing. So take my daughter, who is in medical school, with student loans, and wants to buy a house, wants to buy a car, wants to buy new clothes, and then look at how many houses, cars and new clothes you [savers] are looking to buy.So you are affected by the fact of low interest rates, but your consumption pattern probably won’t be dramatically affected as her consumption pattern. What that means is that when I am trying to get a good effect for the overall economy, the people who are borrowing tend to do more consumption than the people who are saving. And as a result, lower interest rates do tend to result in a stronger economy than we otherwise would have.As effects of QE continue to punish savers, renters, and individuals who “didn’t put on the QE trade” or begin outright consumption, voter discontent (especially discontent from the older voters) would begin to challenge established policies as a result.

A co-applicant can mean both someone who intends to occupy the property, as a husband and wife buying together, or a non-occupant co-borrower. The latter is an arrangement where the person who plans to occupy the property has a debt-to-income ratio (DTI) that is too high for approval. In a case like this, another person—typically a relative—applies along with the primary borrower. That second person’s income and liabilities are blended with the primary borrower’s income and assets.What the co-borrower can’t do is offset a primary borrower’s low credit scores. The lender will use the lower of the two sets of scores in making its lending decision.The more fiscally conservative reading this may say, “Someone co-signing for a person who can’t qualify is setting the stage for disaster! If they can’t qualify on their own, they have no business buying a home!”There are numerous instances where a non-occupant co-borrower can make economic sense. One is a case where a borrower has student loans that are in deferment (no payments). If the loan is FHA, the lender will count the projected payments against the buyer’s DTI, so they may not qualify—even if they don’t have to make payments on the student loan.Another case, also involving FHA, is where a spouse is unable to qualify for financing, such as a recent bankruptcy, foreclosure or short sale. Even though the “non-borrowing spouse” will not be on the loan application, his or her liabilities will be incorporated in the purchasing spouse’s DTI. In a case like this, the parents could come on as co-borrowers and get the DTI into qualifying territory.There are also cases where a primary borrower simply cannot afford the home that fits their needs, but their parents step in to subsidize them, both helping them qualify for the loan as well as contributing money to help make the payments.So the simple answer to the question is yes, absolutely! The co-applicant can be very important.