There are many factors to consider when purchasing a house. It’s a big financial decision and requires a strong plan and a lot of patience. One of the many things you might be considering right now is should you get a co-signer on your mortgage. Although having a co-signer can have many benefits, you should review this option carefully.
When would you need a co-signer?
You only really need a co-signer when you have tried to get approved for a mortgage on your own and you were unable to get approved or weren’t permitted for the limit you wanted to get approved for. Basically, a co-signer is someone who signs a mortgage application with you, so you can get approved for a mortgage (or get approved for a higher mortgage). When someone co-signs for you, they are essentially promising responsibility for the loan but have no rights to the property.
What impacts your ability to get approved for a mortgage?
When a bank is evaluating your loan application, they are trying to determine whether you will be able to pay back that loan. There are a few factors that can impact your chances of getting a mortgage such as poor financial history or any debt or other loans you are currently paying off (for example car payments or tuition loans). However, the two big ones are credit and income. If you have a poor credit score or your income isn’t steady, it will be less likely that you will be approved for a mortgage. If this is your current situation, then having a co-signer on your mortgage application will help. When someone co-signs for you, their income and credit is taken into consideration with yours and allows you to hit the requirements to get approved.
Remember there are risks to co-signing.
Co-signing is a big responsibility and requires a great deal of trust from both parties. It is a large financial and legal obligation that should not be taken lightly. Again, when a co-signer agrees to sign a mortgage application, they are agreeing to the responsibility of the loan if payments are not made. In other words, if you miss a payment, the lender will then go to your co-signer in order to pay off your debt. If that’s the case, both your credit as well as your co-signers credit will be impacted negatively. So before co-signing, be certain you can make the payments on your own. If you’re not comfortable with co-signing for the possible legal and financial repercussions, there are other ways you can get approved for a mortgage. Waiting for the housing market and economy to improve is one route, although a little unpredictable. The other is to work on improving your credit score/ building a credit history and finding a steady source of income.
If you’ve been turned down for a mortgage, there is no need to stress. If you would like to learn more about co-signing and if it’s the right option for you to get a mortgage, at Ares Law we can help. We have the knowledge and expertise to help you make the right decision. We are professionals on wills and estate planning and want to help you find a house without jeopardizing your financial future. You can contact us at our Bracebridge location at (705) 645–8743. Call us today and let’s get started!
