Why you may need one?

There may be times when you have picked the perfect house for you and your family and have received a bonus or a lump sum amount of money that would allow you to make the down payment for your desired house. As you contact your mortgage broker, you might find out that you still do not qualify for a mortgage. This could be because of you financial history or poor credit score. The lender needs to be assured that you will be able to pay the money back in the longer term. In such a situation, you might turn to a co-signer.

What is a mortgage co-signer?

A mortgage co-signer is an individual who is not expected to live on the property or have complete ownership rights but to provide a security blanket. They add their income, assets and credit history to help you secure the loan by assuring the lender of some type of return. This would divide the risk of the mortgage.

Traditionally, the name of the co-signer would be on documents like the deed of trust but not on the title of the property. They will only be involved in regards to the loan process and not the actual ownership of the house.

Mortgage co-signers are involved usually by individuals who are looking to own a home for the first time ever since their credit history may not be as good. Additionally, they may need the financial security in the earlier stages. They will agree to sign on until you are able to accumulate enough finances to handle the mortgage on your own.

Who can be a mortgage co-signer?

Mortgage co-signers are usually people who have some sort of a relationship with the borrower. They could be a family member, a friend or an acquaintance. Anyone who the borrower is close enough to ask for financial backing. The purpose behind this restriction is so that everything is done in good faith. Others may seek to benefit off of your financial situation like a broker or realtor.

Are there any risks associated with mortgage co-signing?

Mortgage co-signing has a few risks associated with it. It can reduce the quality of the relationship between two people if the situation becomes dire and assets are compromised.

Some co-signers may be discouraged because, despite putting everything they own on the line, they will not be gaining any of the ownership rights of the property.

Additionally, any late payments that the borrower makes will affect the co-signer in such a manner that their credit score can decline. This will limit their financial options because they will not be able to secure mortgages, loans or leases themselves.

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Larry Newman

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