When mortgage qualification rules tighten up and/or interest rates rise, you may require a mortgage co-signer to qualify for the loan amount required to get you into your new home.
Additionally, if you’re experiencing difficulty meeting traditional lender mortgage guidelines thanks to such factors as a credit blemish or simply because ‘life happened’ (divorce, illness, job loss, etc), you may benefit from having someone co-sign to help you qualify for a mortgage. Self-employment is another factor that can make it difficult to qualify on your own, especially if you have trouble proving income.
In many cases, a co-signer offers the boost you need to qualify for a mortgage on a home that’s within your means.
If, however, you don’t qualify on your own because it’s apparent that you can’t afford to carry the costs associated with the home you’d like to purchase, it’s in your best interest to take another look at your financial situation and consider buying a more affordable property.
Who should co-sign?
It’s important to find someone to co-sign for you who compliments what you’re currently lacking from your lender’s perspective. If you have poor credit, for instance, you want to enlist a co-signer who has healthy credit. Or, if your income is preventing you from qualifying on your own, you’ll want to find a co-signer with strong income.
The most commonly used co-signors are parents or other close relatives. It’s also possible to have more than one person co-sign a mortgage. In the end, the lender must feel comfortable that the co-signer(s) will help lessen the risk associated with repaying the loan.
How does co-signing work? Co-signing can be set up a couple ways. In one scenario, the co-signer can become a co-borrower. The co-borrower fills a similar role to that of a partner/spouse who’s buying the home with the primary applicant. Essentially, this involves adding the support of another person’s credit history and/or income to the application. The co-signer is placed on title for the home and the lender considers this person equally responsible for the debt if the mortgage goes into default.
Another option is when the co-signer becomes a guarantor. The guarantor is backing the loan and vouching that you’ll pay it back on time. In this situation, the guarantor is actually responsible for the loan if it goes into default.
Have questions about mortgage qualification, co-signing options, or your mortgage in general? Answers are just a call or email away!