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Do You Need a Mortgage Co-Signer?

Do You Need a Mortgage Co-Signer?

Do You Need a Mortgage Co-Signer? - Darren Robinson

For many people with less-than-stellar credit ratings, sporadic (or self-employment) income, or perhaps you’re new to Canada and don’t yet have a credit rating, getting approved for a mortgage can be tough. Even if you know you can afford the mortgage payments and upkeep, lenders may view you as too high a financial risk. That doesn’t mean however, that getting a mortgage is out of the question…perhaps you may just need to have a co-signer to qualify. Let’s learn more about the key considerations of having a co-signer for your home purchase, and if it’s the best mortgage option for you.

1. Approval basics

Banks and other lenders review every mortgage applicant’s finances – including income, credit scores, debt load, investments and savings. If they crunch the numbers and decide you won’t be able to comfortably cover your mortgage payments, taxes and utilities on a home, they will deny your mortgage application. You can apply again at a later date, or you may want to consider using a co-signer for your application.

2. Co-signer responsibilities

A co-signer must have a very solid credit rating as well as significant assets and/or income, as they will be on the hook for the entire mortgage in case of default by the principal applicant. A co-signer will apply for a mortgage alongside you, and must provide all financial information to the lender, as with any applicant. If approved, they become your guarantor, and are financially responsible for the mortgage if you are not able to cover it. Keep in mind that even with substantial income, if a co-signer applicant has an existing mortgage and mortgage insurance, they may not be approved.

3. How to choose a co-signer

As you can understand, being a co-signer is a heavy financial responsibility (and potential burden), and not one to take lightly. For this reason, most people don’t ask friends or co-workers; it’s most common to ask parents or siblings to be mortgage co-signers in Canada.

4. Next steps

If you’ve found the perfect co-signer and you’re on your way to home ownership, congratulations! Remember that as you pay off your mortgage and your debt, you’ll be improving your credit rating and may be able to qualify for a mortgage on your own in a few years. You can have the co-signer removed and be on your way independently once your financials are approved by your lender later on.

However, if you don’t think the co-signer route is for you, don’t forget that you have other mortgage options. For example, you can wait a while until your income, savings and/or credit score improve and apply again, or you can apply to a different lender. Each lender has different approval processes and criteria; they aren’t all the same. That’s why it’s important to work with a certified, accredited and reputable mortgage broker who can help you find the mortgage solution that’s best for you. Call me, Darren Robinson at 705-315-0516. Don’t give up on your home ownership dreams, let’s connect and look at your options today.

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