What are the ups and downs of being a coborrower on someones mortgage?

Asked by Karen Rutherford, Sandwich, MA Wed Jul 30, 2008

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16
Andrew Adams, , 01915
Thu Sep 16, 2010
Seattle Mortgage,

This thread was brought back to life after 2 years by a realtor that searched for local questions. Have any of the recent posts added any additional information from the original posts 2 years ago?
1 vote
My NC Homes…, Agent, Chapel Hill, NC
Thu Sep 16, 2010
As other’s have already written, there are no real upsides in being a co-signer on someone else’s loan. By co-signing you assume equal and full responsibility for this loan and your ability to get a future loan will be impacted. Should the person you’re helping default on the loan, you will be held responsible. I would think about this seriously, it’s not something you should enter into lightly. If the person you’re helping could be helped with a gift of money towards their down payment, this is something you may want to consider. If the person needs your credit score or asset strength to qualify for the loan, I would suggest they buckle down and work on improving their own credit score and paying down their debts.

Best of luck to you
1 vote
Andrew Adams, , 01915
Fri Aug 1, 2008
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.
1 vote
W Murden, Home Buyer, Virginia
Tue Apr 3, 2012
Would I have to take a co-borrower off my loan because I cant refinance it. I owe to much on it and I also have a notaized letter that state that she asked to get her name off the deed and have it only in my name and I am going to give her $2000 for her half of the house?
0 votes
Irena, , Newton, MA
Thu Sep 16, 2010
I wonder how many more will answer?
0 votes
Sergio Herna…, , Naples, FL
Thu Sep 16, 2010
If you're not named on the deed, there are no ups, only downs.
Web Reference:  http://www.golftobeach.com
0 votes
Rhonda Porter, , Seattle, WA
Thu Sep 16, 2010
Andrew, others are probably finding this post useful if they're considering co-signing for a mortgage...even though it's an old post--it's still very relevant.

It's too bad that co-signers aren't notified when a mortgage payment is made late or not made at all (at least, not that I'm aware of). Perhaps this is something that should change.
0 votes
Andrew Adams, , 01915
Thu Sep 16, 2010
This thread is 2 years old...They may have already learned 1st hand the downside to co-signing on a loan!
0 votes
FSBOsuccess, Home Seller, 28590
Thu Sep 16, 2010
As Larry said so well, no upside only HUGE downside. Person you are co-signing for misses or stops making payments - you are SCREWED big time!
0 votes
Tom and Joan…, Agent, Boston, MA
Thu Sep 16, 2010
Karen:

From a financial perspective there are no "Ups" to being a co-borrower and all you are getting are risks. I firmly believe that if someone needs a co-borrower than they should not be purchasing. Have them reference last week's issue of Time Magazine. The cover story was reconsidering Home Ownership.
0 votes
Lisa Cannata, Agent, Falmouth, MA
Wed Sep 15, 2010
Hi Karen
The upside of being a co-borrower is that you're obviously helping a family member be a home owner. The down side is effects your borrowin strength for anything you migh wish to obatain in the future as well as the fact that should the individual you're helping be late with payments or go into default you are just as liable and it can effect your credit rating. Hope that helps.
0 votes
Walt Tyo, , Sandwich, MA
Thu Aug 7, 2008
Easy --- if they default you are held responsible.
0 votes
Rhonda Porter, , Seattle, WA
Thu Aug 7, 2008
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.
0 votes
Ken Lambert, , Exeter, NH
Thu Aug 7, 2008
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.
0 votes
Michael Giles, Agent, Beverly, MA
Fri Aug 1, 2008
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
0 votes
;, , Riverhead, NY
Wed Jul 30, 2008
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."
Web Reference:  http://optionsrealty.com
0 votes
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