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If it were me I wouldn't let her sign even if you could get it past the lenders.
In either case IMO it is a real bad idea.
Medicaid is not welfare.
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,?
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.
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…
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.
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.
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
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.