Should I cosign for my daughter and her boyfriend? My daughter and boyfriend just fresh came out from college and just earn their 1st pay check.

Asked by Mary, Diamond Bar, CA Sun Oct 17, 2010

They both are pharmacists. They will be earning 120k each per year. If they want to buy a house together now, will they qualify for a loan? Assuming they will put 20% down payment and looking for a home cost 700k? If not qualify a loan now, then how long do they need to wait until to qualify a loan? If I have to cosign for the loan, is that mean my name will be on the deed? If me and her boyfriend’s mom both cosign the loan, will it better position and will easier to get the loan approve? Should I request his mom to cosign for him and I cosign for my daughter? If so how to state the ownership on the Tenants in Common (TIC)?
Thank you, Mary

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Liz Urbina, Agent, LAREDO, TX
Sun Oct 17, 2010
Hello Mary,

DO NOT COSIGN A LOAN FOR YOUR DAUGHTER AND HER BOYFRIEND! Many times young ppl want to obtain in one year what took their parents 10 years to obtain. I know you probably want to help her but I feel you would be doing yourself and herself more harm than good. God forbid she finds another boyfriend, or something happens that causes them to not afford those payments. Think about what legal bind that would leave you in. What if God forbid you have a medical or fiscal emergency and you need to borrow money from the bank? A large mortgage can make that all the more challenging. Mary, you should focus on your own retirement goals and fiscal responsibilities. With the amount of money you say they would be making, they should be able to save and buy one cash. Remember, your daughter waited several years and worked to obtain her degree. She will be just as successful if she does the same to purchase a house. -Liz
3 votes
Mack McCoy, Agent, Seattle, WA
Sun Oct 17, 2010
Mary, there is no "right" answer. Maybe you should, maybe you shouldn't.

In any event, if the elect to buy a home together, they need to have a partnership agreement drawn up that addresses the hard, unromantic, "what-ifs" in life. One of the biggies is: what happens to his share if he were to die, and if it were to go to his heirs, in what proportion? What happens to the proportion of ownership if one of them falls behind on their share of the upkeep - if one of them is out of work for a year, for example. What happens if you are called in, as the co-signer, to keep the loan current?

And, Mom, you're the grownup - if you cosign, or the BF's mom co-signs, do you have a share of ownership in the property? And if so, what happens to that share if one of you were to die; would that share go the child owning the home, to a husband, to another child . . .

Two hours with an attorney should help them - and you - craft an agreement, regardless of what the moms decide to do about the down payment. But skipping that step, so far as I'm concerned, is like a pharmacist just reaching up to where something SHOULD be, and pouring it into a jar and handing it to a customer.

All the best,
1 vote
Trinidad Gae…, Agent, Diamond Bar, CA
Wed Oct 20, 2010
I never recommend co-signing for anyone as financial arguments is one of the biggest reasons for relationships to go bad. As much as you would like you children get started, keep in mind purchasing a home is a long term commitment. That's my personal opinion. Depending on their other debt for a 700k home you might not need a co-signer if they are both making 120k each. A local lender will be able to determine that by filling out a complete loan applicaiton and providing supporting documents for income and expenses. As far as ways to hold title should there be co-signers.. There will be a couple options tennants in common or joint tennants. Advice should be seeked by your accountant to which would better suit your wants and needs.

Trinidad Gaeta
Remax Realty 100
0 votes
Rudi Hofmann, Mortgage Broker Or Lender, El Segundo, CA
Tue Oct 19, 2010
If they are both out of school and just acquired W-2 positions, they should be good to go without the need of a co-signer.

If you would be so kind to contact me, I would love to help.

Happy funding, Rudi
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0 votes
Cricket Yee, Agent, Sherman Oaks, CA
Sun Oct 17, 2010
Hi Mary, here's a thought that may help you decide what to do. If they were married, I would feel more comfortable with you co-signing, but they are both young and unattached (no matter how long they've been together). If you decide to co-sign, I suggest you help them purchase a home that can be easily rented out should they break up. That way, if they leave you holding the bag, you can get your payments covered. So that means they are going to have to be happy with a house that is a bit lower in price point.

I would also consult an attorney and write an agreement specifying exactly what will happen in the case they default, break up, etc. What you agree on will have to do with who is providing the down payment, whose name the loan is in, etc.

Crazy, unexpected things happen everyday-- you should expect the best, but prepare for the worst. As real estate agents, we have to extricate our clients from exactly these sort of situations all the time. If it was me, I would let them do themselves, but if I just HAVE to do it, I would look at it as a possible investment situation, and have an exit plan when it 'hits the fan'.
0 votes
Kevin Olson,…, Agent, Colorado Springs, CO
Sun Oct 17, 2010
Consult a RE attorney in addition to talking with a title company to know what your best options are. This situation is very open ended and could go several ways. What is best for you may not be for the next person. With the amount of the loan at stake, seeking advice from an attorney is something that should be considered.
0 votes
Sonsie Conroy, Agent, San Luis Obispo, CA
Sun Oct 17, 2010
In this case, I would not suggest that you cosign for your daughter. She and her boyfriend do not "need" to buy a house right's not an emergency. Let them save, work at their jobs to establish stability, and do all the other stuff people have to do in order to qualify for a loan on their own.

When you cosign, you get all of the problems and none of the benefits of home ownership. If you need a loan for yourself at some point, you are already obligated to pay back that mortgage in full, which greatl reduces your ability to borrow. And there are other issues as well. Just don't do it.
0 votes
Bill Eckler, Agent, Venice, FL
Sun Oct 17, 2010

Cosigning for anyone......should involve long hard consideration of the worst case scenario......and that is being stuck with making the payments if they don't.

Personally, I feel it's best for children to wait, work and save for their life's needs....unless there's a reason why they can't start at the bottom and work their way up, earning their own way! Hopefully it will mean much more to them.

Good luck with your decision.

0 votes
Monir Mamoun, Agent, Denville, NJ
Sun Oct 17, 2010
You won't be on the deed Mary, you'll be on the "hook." Sounds like they both have good jobs, but wait until they start earning that money until you put your money on the line. If you are very wealthy and can accept the risk of possible default, by all means go ahead. But otherwise allow these young people to establish themselves for at least 6 months. Have them make sure they both have ALL credit cards paid down to less than 1/3 available credit.

They need to maximize their own credit scores to get the best rates.

For more information on credit read my trulia blog - linked below - Top 10 Credit Myths.
0 votes
Diana Margala, Agent, Rancho Cucamonga, CA
Sun Oct 17, 2010
As Connie states they should be able to qualify for the loan because their schooling counts as time required by the lender, however if they just started their job it may require some time.

There are a couple of concerns regarding cosigning, first one is that you need to understand that you are responsible for the loan if they default, also if you want to purchase something in the future, it might be a problem for you because this loan may count against your debt ration. I believe you would want to check with a lender so that you can understand that part. Another question would be who would be sending in the payment, if it is your daughter and they miss a payment it will affect your credit. What happens if your daughter and your boyfriend brake up, who would be responsible for the home then?

If his parents also cosign, now who is responsible and will you take title with everyone? Having your name on the grant deed means that you will be taking title, this gives you more leverage and control over the property if something happens, you would want to talk to your accountant to see how that might effect you in the future regarding your taxes, if the property is sold.

As much as we all want to help our children, it sounds like they have a great future because of the career that they have chosen. Cosigning is asking a lot for all parents and should not be taken lightly. Because you are asking questions is good, but it also tells me you are not comfortable in taking this step. Be cautious find out why they are not able to purchase on their own, how long it will take before they can qualify and how it will affect you. Remember that purchase money is non recourse money, (refinancing is not always the best for homeowners and they should understand how that effects them, and if they say they will refinance when they are capable to qualify, there is no guarantee that they will and no way to force them to.

I hope this was helpful.

Diana Margala 909-560-0145
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0 votes
Victor Silvas, Agent, San Antonio, TX
Sun Oct 17, 2010
There are 1st time homewoner programs. I know of a program that does not require credit. Great interest rate, the catch is you need to get on a wating list for about 3 months. To answer your question, you know your daughter better than we can know them. All parents want the best for our children, Im sure they would not want to dammage your credit. In the finance world the term that is used is DTI which means Dept TO Income. THis is a good way of knowing whether your children can handle their home buying expense. A good loan officer can help them with this which I can recommend. If you have anymore questions you can reach me at 210 251-5777 and I will be more than happy to answer any question you have.
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0 votes
Connie Bramb…, Agent, Rancho Cucamonga, CA
Sun Oct 17, 2010
Hi Mary,
You should not need to co-sign with them. If they are working in a field they have a degree in; the lender will not require 1-2 years on the job. They will qualify unless their credit is not good, and if that is the case I would say it is not a good thing for you to do anyway.
And yes if you are on title with anyone who is not your spouse, you should take tiltle in a maner that will best suit your situation. There are many ways to take title. Most people want the right to will the property should you pass away. I can get you a copy of all the ways to take title with explanation if you like. Just let me know.
Have a great weekend,
Connie Bramble
Prudential CA Realty
0 votes
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