What to Consider in Co-Signing a Mortgage

There are several things to consider when you are asked or volunteer to co-sign a loan for a home purchase. You will want to make an informed decision, since you will be putting your creditworthiness on the line to guarantee a loan in order to help a primary borrower who can’t qualify on their own merits. Co-signing a mortgage could put you at financial risk and jeopardize your relationship with the borrower.

As a co-signer, you will assume responsibility for payment of the loan and any associated penalty fees in the event the primary signer defaults on the loan. There would be heavy consequences to your credit for not taking over payments.

The co-signer’s role is mostly that of enabling the primary borrower to qualify for the loan. It is important that the borrower be able to comfortably make the payments without the co-signer’s help. Otherwise, a more affordable home should be considered.

The primary borrower will usually seek a family member or friend to co-sign in order to add strength to the borrower’s mortgage application. A co-signer with a high credit score, good credit history and ample income to cover payments in the event the borrower defaults will be the best candidate for co-signing.

Conventional loans have less restrictive criteria than FHA loans for qualifying as a co-signer. With both types of loans, your name cannot be on the title. These conditions may influence your decision to co-sign or not. Contact me for more information on what needs to be considered when co-signing a loan.