Yes, some borrowers can have a co-signer on a mortgage. A co-signer can sometimes help strengthen an application, especially when the issue is qualifying income or overall borrowing strength, but a co-signer will not solve every approval problem. It is also a serious commitment for both people involved, so it’s important to understand when co-signing may help, when it may not, and the risks each party takes on before moving forward.
Do you have an adequate income required to carry mortgage payments on top of all the other bills you have to pay? Is your debt load low? Is your credit score high?
All these factors are taken into consideration when a mortgage lender determines whether or not you are able to get approved for a mortgage. The thing is, many people are not able to secure a home loan because of their income, debt load, or credit score, among other things. Does this mean they have to forgo their dreams of homeownership? Not necessarily. Getting a co-signer to sign with you on a mortgage can help you get approved. Like credit cards or car loans, some mortgages allow borrowers to have co-signers on the loan with them, enhancing their loan application.
However, a co-signer on a mortgage loan doesn’t have the same impact that it might on another loan, and it poses serious drawbacks for the co-signer. That’s why anyone who chooses to co-sign should be fully aware of their obligations before committing to this position.
A mortgage co-signer is a person that isn’t an owner-occupant of the house. However, the co-signer is on the hook for the loan. Usually, a co-signer is a family member or close friend that wants to help the primary borrower qualify for a mortgage. But it could be anyone who has the financial and credit strength needed to be approved for a mortgage and is willing to assume the potential burden should you be unable to continue making your mortgage payments at some point in the future.
As a co-signer on a mortgage, they bear full responsibility for the payments, which can have serious consequences if the primary borrower does not make the payments. If you stop paying your mortgage at any time, the co-signer will then have to take over the payments. That means they will have an added bill to pay every billing period without the benefit of ownership of the property.
When a co-signer applies for a mortgage, the lender considers the co-signer’s credit score. So, the co-signer should ideally have a decent credit score of at least 650 or more in order to be qualified to become a co-signer on a home loan.
Further, the lender will consider the co-signer’s income and savings along with the borrower’s. For instance, if a borrower only has $3,000 per month in income but wants to have a mortgage that, when added up with his other payments, works out to a total debt load of $1,800 per month, a lender might not be willing to make the loan.
If the borrower adds a co-signer with $3,000 per month in income and no debt, the lender looks at the $1,800 in payments against the combined income of $6,000 and is much more likely to approve it.
Co-signers can add income, but they can’t mitigate credit problems. Typically, the lender will look at the least qualified borrower’s credit score when deciding whether or not to make the loan. This means that a co-signer might not be able to help a borrower who has adequate income but doesn’t have adequate credit. Even if the co-signer has good credit – which they will be required to have in order to become a co-signer – this arrangement still might not be enough if your credit score is below a certain level that the lender is comfortable with.
Not only will the borrower be put under a microscope by the lender when it comes to determining whether or not a mortgage approval will result, so too will the co-signer. The mortgage lender is going to require a full application from the co-signer in order to gain a full and clear understanding of their financial health, including information on properties they currently own, their current debts that they are servicing, and all financial housing obligations.
People often use the terms co-signer, co-borrower, and guarantor as if they mean the same thing, but they are not always handled the same way.
A mortgage co-signer generally signs the loan documents and shares responsibility for repayment, but may not have an ownership interest in the property. Fannie Mae guidance treats guarantors and co-signers as credit applicants who do not have ownership interest in the subject property as indicated on title. In practical terms, that means a person may help support the loan without being added to title.
A co-borrower is typically a borrower on the loan as well. In many transactions, a co-borrower may also have an ownership interest in the home, such as being on title, but that can depend on how the loan and property documents are structured. Like other borrowers, a co-borrower is generally responsible for the mortgage debt.
A guarantor is usually someone who supports the loan by agreeing to be responsible for repayment if needed, without taking ownership of the property. Depending on the lender or loan program, the role may be documented differently from a co-signer even though both can be liable on the debt.
Program rules can vary by lender and loan type. For example, Fannie Mae also states that a non-occupying borrower must not be an interested party to the transaction, such as the builder, property seller, real estate agent, or broker. Because of these variations, borrowers should confirm early whether the lender is treating the additional party as a co-signer, co-borrower, or guarantor and whether that person will be on title.
Co-signing arrangements carry risks for both the borrower and the co-signer. The co-signer is taking on legal responsibility for the debt without necessarily getting the benefit of living in or owning the home. If the primary borrower pays late or defaults, that negative payment history may appear on the co-signer’s credit report and could damage the co-signer’s credit.
There can also be collection consequences if the loan goes seriously delinquent and the debt is not paid. Consumer protection sources warn that lenders or collectors may pursue a co-signer for payment, and some consequences can depend on state law. For that reason, anyone considering co-signing should review the loan obligation carefully and understand that state-specific remedies can vary.
For the borrower, having a co-signer may add an additional level of pressure to make payments since defaulting on the loan can hurt both the borrower and the co-signer. That said, a borrower should never consider asking someone else to co-sign on a mortgage in order to help them get approved if they do not believe they will be financially capable of keeping up with payments. Ultimately, as a borrower, it’s imperative to take the time to evaluate your financial strength and your ability to add another bill to your budget before asking someone you know to be a co-signer. At the same time, co-signers should also assess not just their own financial situation and tolerance for risk but also the borrower’s financial habits and responsibility before making such a major commitment.
This is one of the most common questions borrowers ask after closing. In many cases, a co-signer cannot simply be taken off the mortgage by request alone. The most practical path is often a refinance into a new loan in the primary borrower’s name, assuming that borrower can qualify on their own at that time.
In some situations, a lender or servicer may allow a liability release or another approved change, but borrowers should not assume that option will be available. Consumer reports show that some servicers create obstacles when people try to remove an original borrower from liability, and release options can depend on the loan documents, investor rules, and servicer procedures. If removal is a future goal, verify the available options directly with the lender and loan servicer rather than relying on verbal assumptions.
Finally, it is important that you and your potential co-signer evaluate the alternatives. Get creative and identify several options that accomplish what everybody needs and what will benefit you both in the long run. For instance, rather than having them co-sign, you might want to have them help out with a down payment instead. A bigger down payment could result in lower required monthly payments—making it easier for a borrower with limited income to be approved. Obviously, if you and your potential co-signer choose to go with a co-signing alternative, then that person will need to have substantial cash on hand, need to be willing to lose that money, and you will both need to communicate about how to handle that down payment. Remember to discuss whether or not the down payment assistance is a gift or if you need to set up a formal private loan agreement. Ultimately, this is just one alternative to cosigning that you both should consider.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
Yes, some borrowers can have a co-signer on a mortgage. A co-signer can sometimes help strengthen the application by adding income or overall borrowing strength, but a co-signer will not fix every approval issue.
A co-signer is often a family member or close friend, but it can be anyone willing to take on the obligation and who has the financial and credit strength needed to qualify with the lender.
Lenders generally review the co-signer much like any other applicant. They typically look at the co-signer’s credit, income, savings, existing debts, and other housing obligations to decide whether the loan can be approved.
No. A mortgage co-signer is generally not an owner-occupant of the property. The co-signer helps support the loan and is responsible for repayment if needed, but does not have to live in the home.
Yes, that is possible. A mortgage co-signer generally signs the loan documents and shares responsibility for repayment, but may not have an ownership interest in the property or be added to title.
Not always. A co-signer can add income, but lenders often look at the least qualified borrower’s credit profile when making the decision. That means a co-signer may not overcome a primary borrower’s weak credit if it falls below the lender’s standards.
A co-signer usually shares responsibility for the loan without necessarily having ownership in the home. A co-borrower is also a borrower on the loan and may have an ownership interest depending on how the documents are structured. A guarantor generally agrees to be responsible for repayment if needed without taking ownership, although lenders may document that role differently by program.
A co-signer has legal responsibility for the debt, but may not have ownership rights in the home. If the co-signer is not on title, they may be liable for payments without receiving the benefit of owning or living in the property.
Yes. If the primary borrower pays late or defaults, the co-signer may have to make the payments and could see damage to their credit. Collection consequences may also apply if the loan becomes seriously delinquent and remains unpaid.
In many cases, a co-signer cannot simply be removed by request. The most practical option is often refinancing into a new loan in the primary borrower’s name once that borrower can qualify alone. Some lenders or servicers may allow a release of liability or another approved change, but that is not guaranteed.
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