Pros and Cons of Co-Signing a Mortgage
May 1st, 2014
May 1st, 2014
Are you thinking about co-signing a mortgage loan? Perhaps, you’re a parent who wants to help your adult child get their first home. Or, maybe you’re a family member or a friend of someone that you want to help in getting a home. When you co-sign on a mortgage, you’re agreeing to pay this loan if your family member or friend doesn’t. So before you sign on the dotted line, you should consider the pros and cons of taking on this responsibility and what it could potentially mean to you.
There are several reasons why a homebuyer may need to have a co-signer on their mortgage:
The purpose for being a co-signer is to help the homebuyer qualify for the new mortgage loan. As a co-signer, you’ll need to have enough income and little debt to meet this new loan responsibility, since the lender will examine both your and the buyer’s applications, credit history, employment, income, debt-to-income ratio and other financial factors.
Because you’ll be responsible for the loan if your family member or friend cannot repay it, you need to make sure you can trust them to make the mortgage payments. It may sound harsh to have to evaluate someone’s trustworthiness, but if you don’t think they’ll be responsible enough to repay the loan, then you shouldn’t co-sign for them.
Some pros of co-signing on a mortgage are:
Some cons for the co-signer are:
Co-signing on a loan is a big commitment, so make sure you weigh the pros and cons before you sign. You may even want to consider talking with your attorney for legal advice. Your lawyer can create a contract that details each person’s responsibility regarding the loan – although this contact won’t take away your obligation if the other person defaults on the loan.
If you, your family member or friend needs a mortgage loan, contact the mortgage specialists at Grandview Lending. They can help you, your family member or friend find the right mortgage loan based on your or their situation.
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