There are a few different situations where getting a cosigner might make sense, but it’s important to understand the risks.
So you’re in the market for a mortgage, and you find one that’s perfect—except for the fact that your credit score is just a little too low to qualify on your own. What do you do? You could try to increase your credit score, but that could take a significant amount of time. Or, you could ask someone to cosign on the loan with you. This article will discuss everything you need to know about mortgage cosigners.
What is a Mortgage Cosigner?
A cosigner is someone who signs the home loan with you and agrees to be equally responsible for the loan, even if they are not living in the home or using the property in any way. If you default on your monthly payments or default on your loan obligations for any reason, they will be held financially responsible—and their credit score will also take a hit.
When Does Getting a Mortgage Cosigner Make Sense?
There are a few different situations where getting a cosigner might make sense. For instance, if you have poor credit or no credit, having a cosigner with good credit can help you qualify for a loan (and get a lower interest rate). Also, if you’re self-employed, have a lot of debt, are unemployed, or don’t have the minimum income required, having a cosigner can help you qualify for a larger loan.
What are the Risks of Having a Mortgage Cosigner?
Before asking someone to cosign on your mortgage, there are a few risks to consider. First and foremost, if you default on your loan, the cosigner’s credit score will take a hit—and so will their ability to get a loan in the future. Additionally, if you have a falling out with your cosigner for any reason, they could technically ask to be removed from the loan—leaving you responsible for the entire mortgage on your own.
How to Choose a Mortgage Cosigner
If getting a cosigner makes sense for your situation, the next step is to choose someone willing and able to sign on the dotted line. Ideally, you should choose someone with good credit and a steady income—someone who will be able to make the payments if you can’t. Additionally, it’s essential to choose someone you trust.
More Qualities of a Good Mortgage Cosigner
- They should be reliable—you need to be sure they will make the payments if you can’t.
- They should be patient—it could take years for you to improve your credit score enough to refinance the loan and remove them from the mortgage.
What Happens if You Can’t Find a Mortgage Cosigner?
There are a few other options if you can’t find a cosigner (or you don’t want to ask someone to cosign on your mortgage). You could try to get a government-backed loan, like an FHA loan, which has more lenient credit requirements. You could also try to increase your credit score, use collateral, or shop around for a lender willing to work with you without a cosigner.
Contact the Better Rate Mortgage
Are you looking for a mortgage? Better Rate Mortgage can help! We work with people with all sorts of credit scores and can help you find a loan that fits your needs. Contact us today to learn more!