Are you having trouble qualifying for a mortgage loan on your own? Or are you not getting approved for a large enough mortgage loan and need to amp up your mortgage application? If you’re having trouble getting approved for a mortgage, a co-signer may be what you need to save the day! But what is a co-signer and how can having one improve your mortgage application? What are the pros and cons of having a co-signer on your application?
I’m here to tell you.
Having a co-signer on your mortgage is a small change that can make a huge impact on your application. While there are some risks involved with being a co-signer, there are also many great benefits to having one. A co-signer could even be the difference between you being approved for a mortgage or not. If you’re interested in getting a co-signer, this is a quick overview explaining what you need to know.
What is a co-signer?
A co-signer is someone whose name goes on a mortgage along with the primary borrowers who are not fully qualified to get approved for a mortgage on their own. If there are areas of your mortgage application that are weak, a co-signer can help improve those weaknesses on your profile. When someone co-signs on a mortgage loan, it means they agree to take responsibility for the loan if you default on your mortgage payments.
When a person chooses to co-sign on a mortgage, their income, credit history, and DTI will be included in your mortgage application.
Unlike a guarantor, a co-signer is not a character reference. If the primary borrowers are unable to meet their financial obligations, that responsibility now lies on the co-signer’s shoulders.
Why should you consider a co-signer and how will having one benefit you?
Having a co-signer is an easy way for you to check off all the boxes on your mortgage application. One real perk about a co-signer is that they can help you without having to dig out any cash from their wallets. As an example, let’s say your parents want to help you purchase your first house. You need help with your application, and they don’t have sufficient funds to loan or gift you any money. Instead, they can co-sign for you and help you improve your mortgage application so you can get approved for the mortgage you need.
You only need to consider a co-signer if you’ve applied for a mortgage, and you’ve been told that your application needs to be stronger to get approved. In this case, a lender or mortgage broker will usually recommend a co-signer as your first resolution to your problem.
When should you get a co-signer?
If you can qualify for a mortgage on your own without a co-signer, that’s great. If, however, your application needs a boost in certain areas, that’s when it’s time to consider a co-signer. However, you do have options. Before making any final decisions, consider getting a co-borrower or a guarantor to sign on your mortgage application instead. Alternatively, you could also ask your family members to help with a down payment through a gift or family loan. To help decide which decision is best for you (and the people you choose to sign for you) ask your mortgage broker for advice.
Who can be a co-signer?
When looking for someone to co-sign a mortgage for you, first and foremost, make sure it is someone you can trust. Typically, people ask family members or close friends to be co-signers for them on their mortgage application. In most cases, people usually ask their parents to co-sign on their mortgage. Trust is the biggest component when it comes to a co-signer. Not just you as the primary borrower, but your co-signer needs to be certain that you will meet your financial obligations.
When choosing the right person to ask to co-sign a mortgage loan, ensure they are able to improve your application in the areas where your finances are weaker. For example, let’s say the current issue with your mortgage application is that your DTI (debt-to-income ratio) is too high. When looking for the right co-signer, you will want to choose someone who will help improve your DTI. This means they can’t have a lot of outstanding debt either.
What the co-signer should know
While there are many benefits for the primary buyers, the co-signer should be aware of the risks of being a co-signer on a mortgage application. When a person chooses to become a co-signer, their DTI may be affected. If the primary buyers can’t make their payment, their debt becomes your debt. Remember, you are putting your credit and your finances at risk when you become a co-signer. If you trust that the primary borrowers will make their payments on time, then you can move forward with becoming a co-signer. You should also never feel pressured into co-signing a mortgage loan for anyone.
It is in your best interest to seek out professional advice from a financial advisor or real estate lawyer on risks, financial obligations, and responsibilities before you move forward with becoming a co-signer.
The bottom line
As the primary borrowers, there are many benefits to having a co-signer on your mortgage application. However, be aware of the risks and understand what you’re asking of someone when you request that they co-sign for you. Also, be sure they fully understand the risks involved. Being a co-signer is a big responsibility, and it is a decision that should not be taken lightly.
If you’re ready to get approved for a mortgage, work with me, Darren Robinson, today!
I can not only walk you through the mortgage application process, but I can also recommend different ways you can amp up your mortgage application if there are areas that need improvement. If you are considering asking someone to co-sign on your mortgage, I would love to answer any questions you may have. Give me a call today at 705-315-0516 or click here to schedule an online consultation with me. If you think homeownership is out of reach, think again! You have tons of options to help you get approved for a mortgage and I’m here to help in any way I can!