6 Things to Consider Before Co-Signing a Mortgage
When co-signing a mortgage, you are also risking your own credit worthiness. Anything that happens regarding this loan will directly affect you. Here are some facts about co-signing on a mortgage you should fully understand before you commit.
Relationship doesn’t matter, although it helps.
When you co-sign to help somebody else qualify for a mortgage, the expectations should be fully explained and documented. Read: Why Co-signing Loans for Your Kids Is a Bad Idea
Someone else’s choices shape your chances.
Any delinquencies will appear on your credit report as well, as you have just as much obligation on his liability as he does. Remember that the responsibility to make timely payments is still split 50/50 between the two parties. See: How Co-signing Could Affect Your Credit.
Get used to each other.
All parties are conjoined. The person who you co-signed for will have to pay off the mortgage by means of refinancing you off the mortgage, or by selling the property, which pays off the note.
You may want to consider living together.
You don’t have to live in the property you are co-signing for, referred to as a non-occupant co-borrower. However, if all parties purchase and live in the house of their primary residence, there is a greater level of transparency of financial status amongst the borrowers, which could mitigate difficulties down the road. Find out: When You Should (and Shouldn’t) Co-sign a Loan
Your borrowing power will be reduced.
Your ability to get another mortgage, another credit card, or another car loan will be hindered to the extent of how much of your income and liabilities are being used for the benefit of the person you originally co-signed for. Simply put, to co-sign for someone else reduces your chances of qualifying for future credit obligations.
Make sure you understand what co-signing really means.
People co-sign for other people to help secure mortgage loan financing, not knowing the full ramifications of what co-signing does for the long-term prospects of obtaining credit in the future. On the flip side, read about 3 Reasons Why You SHOULD Co-sign a Loan.