Are you having difficulty getting approved for a home loan on your own?
A co-signer can make your goal of owning a home attainable.
A co-signer is someone who promises to take responsibility for your loan if you can’t make payments which can help you qualify. Young adults and students who have yet to build credit may find that a co-signer is a viable shortcut to investing in a home sooner than later.
Generally, co-signers are parents or relatives, but you can ask anyone that has sufficient credit and income to co-sign your home loan. Someone with a long credit history is an ideal co-signer candidate.
The Implications for Co-Signers
Becoming a co-signer isn’t a decision that anyone takes lightly especially someone who has spent years (and possibly decades) doing what’s necessary to build strong credit.
Your co-signer must put a lot of faith in your ability to be a responsible debtor. Any late payments you make may appear on their credit report. Co-signers will also have a heavy burden to carry in a situation where you can’t afford payments. They’re on the hook for the loan balance if you default.
Whoever agrees to co-sign for you is taking a significant risk, so don’t be surprised if you have trouble finding someone who’s willing to do you a favor.
Asking a friend or relative to trust you enough to co-sign your loan can be nerve-wracking. A close relationship can even become strained if you ask and they refuse.
For this reason, we’re happy to help you review your credit and income first to make sure there are no other alternatives to consider before consulting your Rolodex for possible co-signers.
How to Remove a Co-Signer
A co-signer doesn’t need to be on your mortgage forever. They can be taken off your home loan when you refinance. The promise of being removed later from a mortgage can make the idea of co-signing more appealing to whoever you ask.
The caveat here is that to get approved for a refinance without a co-signer you’ll need to have the credit and income to qualify for a home loan on your own.
If you currently have a home loan with a co-signer, be sure to work on strengthening your credit before attempting to refinance.
Using a co-signer can be the key to unlocking the door to your next home, but it’s important to keep in mind the impact your payment habits can have on the person who’s willing to take responsibility for your debt.
With that said, it’s simple to avoid any of the potential drawbacks of using a co-signer.
Always make on-time payments and work diligently to improve your credit history so you can get approved for a refinance on your own later down the road.