Do They Take a Co-Signer's Income Into Account?

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Ask your lender directly if your co-signer needs a specific income for your loan approval. If you were declined for a loan as a sole borrower, your lender will explain why your loan was declined and send you a letter explaining which credit bureau helped make the decision and which credit information was unfavorable. Depending on why you were declined for the loan, your co-signer's income might not matter in the lender's approval process if the co-signer has a poor credit rating. If the reason for your application's decline was insufficient income, then your co-signer's income may determine your loan approval.

Proof of Income

Once you determine if your co-signer needs a specific income, check with your co-signer to make sure he fits the lender's loan criteria. Your co-signer must prove his income to your lender. If the co-signer is employed, obtaining a recent pay stub that states year-to-date income is acceptable proof of income. If the co-signer is self employed, he must provide several years of past tax returns. The tax returns must support the same income claimed on the credit application. If your co-signer's income comes from other sources, such as disability, Social Security benefits or a pension, ask your lender which documents it needs for proof of income.

Considerations

Aside from income, lenders also review a co-signer's debt-to-income ratio. This ratio shows the difference between the co-signer's income and her debt responsibility. Your co-signer must be able to afford your loan payment in case you default on the loan. If your co-signer, for example, earns $100,000 per year but has a debt responsibility of $75,000 per year and maxed-out loan or credit balances, the co-signer probably isn't a good candidate for your loan application. If your co-signer makes $25,000 per year and carries little or no debt, you might obtain a loan approval.

Obtaining a Preapproval

To determine if your co-signer is a suitable applicant, apply for a loan. If you earn a decent income yourself but have limited or no credit history, your lender might approve your loan based on the co-signer's credit score instead of income. If your lender is local, arrive with your co-signer to complete your loan application. Speak with a lending representative about your loan and lending options. If the lender declines your loan application, then you might need a different co-signer with a stronger credit score or better debt-to-income ratio.