non-occupant co-borrower affects on credit score and tax return

Asked by abdul, 94555 Fri Jan 24, 2014

My father in law is a retired person and his sons do not have good credit. Our loan agent asked me to be non-occupant co-borrower on refinance.I already own a house and have loan on it. If I sign the document, will my credit be affected? Will my tax return be affected?

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John Dutra, , Fremont, CA
Fri Jan 24, 2014

Much like co-signing for any loan, you both will be tied to the performance of the loan itself. Payments made on time will help you both and missed payments will mark your credit and reduce credit scores.

The only way this can be changed is for one of the borrowers to refinance the loan in their name alone, some time in the future.

As pointed out below, the mortgage deduction can be split in any way you both choose as long as it does not exceed 100% of the benefit. You may split the benefit 50/50, 70/30, 90/10 - however you may agree to handle it is fine.

As co-owners on the property, don't forget that non-payment of property taxes can impact you as well. Non-payment can lead to tax liens and could eventually the loss of the home if not handled properly.

On the plus side - having a mortgage paid on time can do wonders for your credit. Over time you will see your credit score improve and future creditors will look favorably at the depth of your credit.

Hope this helps - have a good weekend!
1 vote
The Medford…, Agent, Fremont, CA
Sun Mar 9, 2014
Great answers below - bottom line, it will affect your ability to get credit down the road and, if there are any delinquencies, your credit rating will also be affected.
0 votes
Robert Spino…, Mortgage Broker Or Lender, Mill Valley, CA
Sun Jan 26, 2014
Should you co-sign, you will take on another debt obligation which will factor into your future credit capacity. In some cases, future creditors may view this as a contingent liability and, if you're able, will not consider the obligation if you can show that the other party has been making the payment for the last 12 months. But we're seeing that contingent liabilities are getting harder and harder to fly and should this trend continue, you would be wise to be prepared to qualify for future credit you may take on with this co-signed mortgage payment in full.

If you have any questions, let me know.

Rob Spinosa
0 votes
John Juarez, Agent, Fremont, CA
Sat Jan 25, 2014
The loan for which you co-sign is your indirect obligation. In other words, if the principal borrower does not pay you must do so. That obligation will also affect your debt/income ratio when you apply for any other loan or credit arrangement.

Co-signing is not an action to be taken lightly.
0 votes
Alexander Gr…, Agent, San Jose, CA
Fri Jan 24, 2014
If they do not pay the mortgage then yes it will be affected.

And you get more interest write off for your taxes

Alex Greer Loan Officer NMLS #1056079 408-352-5147
0 votes
Anita, , Fremont, CA
Fri Jan 24, 2014
Hi Abdul Jaan

It will effect your credit because it will be on your credit but you dont have to live in it. You can do non-occupant co borrower. Also, i cant advice in regards to taxes, please contact your tax preparer or attorney thanks
0 votes
Claudia Mull…, Mortgage Broker Or Lender, Fremont, CA
Fri Jan 24, 2014
Hi Abdul,
As long as the payments on the for which you have cosigned are made in a timely manner (no 30 day late payments), your credit score will not be impacted negatively. In fact, a mortgage should help your credit rating.
Your tax return would not be affected because you will not be claiming the interest on your tax return.

0 votes
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