Easy --- if they default you are held responsible.

I'm assuming that you are talking about co-signing on a mortgage for a property you will not be residing in?

As a coborrower on a mortgage, you are liable for that debt until the mortgage is paid off (the home is sold or the mortgage refinanced). The mortgage payment will be factored against you until the co-borrower has made payments on time for 12 months (when qualifying for a new mortgage) . In addition your credit score will be impacted by obtaining the new debt and depending on whether or not the co-borrower makes the mortgage payment on time.

Below is a link to an article I wrote on my nationally recognized blog regarding co-signing a mortgage.

From my experience as a mortgage broker, most lenders go by the middle credit score (out of the 3 bureaus) from the person with the LOWEST credit score. So a person with a FICO of 740, and the other borrower on the note as 640, the bank will qualify the loan based on the 640 credit score. That's with 90% of banks out there, anyways. The bank might need you as a co-borrower for your additional income that you could bring to the table. That's my guess. Please let me know if I can help any further. Good luck,

Ken L.

The answer will vary depending on your intentions if you intend to occupy the property and have an ownership interest in the property then the first answer is accurate. The 2nd answer touches on the more complicated answer. If you are being asked to be a co-borrower on a mortgage because the borrower doesn’t qualify without you, there is no upside. You are on the hook for the property, if they miss payments it will impact your credit, when you try and get a loan that payment is included in your debt.

If you are co-signing a loan to help out a friend, I would not recommend it. If you are a parent that is trying to help out one of your kids and you understand the risks to your credit and your ability to obtain financing on your own and are comfortable with the risk then all is good.

What the loan officer is saying is that they can't get bank approval based on their own credit score, annual income and assets, so they want to use any combonation of yours to get the bank to approve the loan. In my opinion very risky. If it is a close family member or friend and you are in a possition to give them some money for a larger down payment that may help, at least you know upfront how much you stand to lose. If you do decide to co borrow, make sure you are using a reputable lender. Check out this article that appeared in my local paper today but will effect many from Massachusetts. http://www.salemnews.com/punews/local_story_213224531.html

The "ups" include home ownership; the "downs" create a payment on your credit report that could inhibit you from making your own purchases outside of the house purchase. Additionally, you're relying on the other party to keep the mortgage current- any deviation shows up on your own credit report. It depends largely on the reason that you've found yourself being a requested as "co-borrower."