Purchasing a house is a huge financial decision with many factors to consider. When trying to get approved for a mortgage, it can be hard to hear that you haven’t been approved for a loan or that you have been approved, but not for nearly enough to purchase your dream home. There are options you can take however to get approved for a mortgage and one way is by getting a co-signer. Having a co-signer can be beneficial, however, you should weigh your options carefully and make sure a co-signer is right for you.
When do you need a co-signer?
When you haven’t been approved for a mortgage or want to get approved for a higher mortgage, that is when you would consider getting a co-signer. Essentially a co-signer is a person who signs your mortgage application with you so that their income and credit is considered alongside yours, helping you improve or get a mortgage. As a co-signer, you do not own any of the property, but you are legally promising responsibility for the loan and ensuring that the person you are co-signing for will make all their payments on time.
What impacts your chances of getting approved for a mortgage?
When a bank is evaluating you for any type of loan application, they take into account two major factors: your credit and your income. There are other things that come into play as well such as your debt or other loans you are already working on paying off (for example, college/university payments or car loans) however, credit and income are the biggest factors that impact your chances of getting approved for a mortgage. If your credit score is low or you have a very unsteady source of income, you will more than likely get denied for a mortgage. A co-signer in this situation can help you though because their income and credit are reviewed and therefore can improve your chances of getting approved.
There are big risks to co-signing.
There is a lot of trust that goes into having someone co-sign for you – and even more trust that the co-signer needs to put on you as well. Co-signing is a legal obligation and a large financial risk if not followed properly. When a co-signer agrees to sign the mortgage application for you, they are basically telling the lender that you are financially capable to make these payments. If you do not follow though with this promise, the lender will then go to your co-signer and ask them to pay your debt. In that case, both of your credit scores will suffer. That’s why it is so important to be sure before you have someone co-sign that you are able to make all payments on time and on your own. If you’re unsure about co-signing for the possible financial and legal consequences, there are still other ways you can get approved for a mortgage. One way is by waiting to see if the housing market and economy improve at all, although this is a risky route to take. The other is to take some time and work on improving your credit score or finding a steady source of income and saving more.
If you haven’t been approved for a mortgage, there is no need to worry. If you’d like to find out if a co-signer is the best route for you to take, let us help you at Ares Law. We are specialists in will and estate planning and we would like to use our expertise to help you get the house you want. Let us guide you in making the right choice for your financial future. With our knowledge and expertise, you can stress less about finances and dream more about that perfect house. Contact us at our Parry Sound location at (705) 746-6444. Let’s get started today!
