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Can You be a Co-signer on a Mortgage Home Loan - Should You Cosign?
Co-signing on a Mortgage Loan
Being a cosigner on a Mortgage? Should you do it? What are the benefits and risks?
In today's economy, as home prices drop and foreclosures increase, many people are looking to less traditional ways to fund the purchase of a new home or to refinance the home they are already in. With the real estate market badly hit, some people are looking for alternative ways to stay in their homes or make that dream of home-ownership a reality. For some people though, especially people with damaged credit - owning, buying or refinancing can seem impossible.
Having a cosigner on a mortgage loan could be one way that refinancing or buying that first home can be made possible.
Risks and Benefits of Co-Signing for a Loan
As in any real estate purchase, sale or transaction, there are risks involved. Having a cosigner means that the cosigner is putting themselves at risk to help the home buyer purchase or refinance. Typical cosigners could be family members with good credit that want to help another family member. Maybe a parent wants to help a child get their first home and are willing to cosign a mortgage note to help with the purchase. Sometimes friends will act as cosigners although this is less typical.
Cosigning on a mortgage loan usually gives the cosigner less buying power for other future possible purchases. The video below gives a short but good understanding of the risks involved with cosigning for a loan. As with any real estate purchase, proper steps need to be taken - appraisals, home inspections, a preliminary report on the property along with possible advice from a lawyer (which is highly recommended if not mandatory for some mortgages)
Co-Signers and Guarantors - Definitions and Risks
Careful Consideration when Co-signing!
Before you cosign on any loan for anyone, careful consideration needs to go into the decision. If the person defaults on the mortgage payments will you be able to make the payments for the home? Are you willing to take that risk?
Assess the persons situation carefully. Will the person or persons be in a better place in the future where they can refinance the property themselves and take you off as cosigner - or will you be responsible for a long time? And how long are you willing to be responsible?
Cosigning a mortgage loan may be one way to help someone but can have effects on your relationship with the person you are helping. What if they default?
Before consigning on any loans it is advisable that you consult with a lawyer to help you go over the risks and benefits. Perhaps cosigning for a loan will help a child you love get a new or fresh start. Just make sure when cosigning however that you have a good grasp of the good, the bad and the ugly of being a cosigner.
(Dorsi Diaz is a freelance writer and publisher here in the Internet and writes on a variety of topics including finance, health, controversial topics and frugal living)