Whether you’re the person buying the home & you’re in need of a reliable co-sign, or it’s a loved one asking you to be their co-sign, it’s important to know a few things about the responsibilities that mortgage co-signers have. The landscape of housing mortgages has shifted significantly over the last number of years, and many homebuyers are finding out that it’s much more difficult to secure a mortgage loan than any other time in recent history. If you are looking for a co-signer or have been asked to be someone’s co-signer, here are things you need to know.
Defining A Co-Signer
An individual looking to purchase a home by borrowing money from a mortgage lender will require enough income or credit score to secure a loan. Borrowers who struggle to meet these prerequisites may need a co-signer to reinforce the mortgage approval process. In many cases, an individual will have two co-signers (i.e. Mom & Dad, Grandma & Grandpa, etc.) to ensure the financial burden isn’t placed on a single person. The purpose of a co-signer is to strengthen the borrower’s reliability, so it’s important to select someone with a steady income and satisfactory credit score.
The Responsibilities of a Co-Signer
Before someone signs on as a co-signer, they must have full trust in the person lending money to repay their mortgage. Essentially, if the homebuyer is unable to make their monthly or bi-monthly payments on time, the co-signer is legally responsible for paying those dues. In many scenarios, the co-signer will not be aware of outstanding debts until there has been a significant accrual of back payments, at which point, the co-signers credit score may already be negatively affected. Co-signors must have a full understanding of the costs involved when they agree to co-sign, which could include condo expenses and property tax.
Remove A Co-Signer
The individual who borrowed a mortgage loan from a lender will not be able to make any adjustments to the mortgage agreement without permission from the co-signer. Therefore, if & when you wish to remove a co-signer from your agreement, you will need to contact the mortgage lender to determine your next course of action. Be sure to have an in-depth review of the mortgage terms with your lender before agreeing to anything – you may be able to secure a mortgage loan that allows you to switch ownership without violating the terms of the contract.
Co-Signing for a mortgage is an incredibly kind gesture that a loved one can make for their child or relative; however, it needs to be carefully evaluated to ensure all financial obligations will be satisfied. For more information, contact Mortgage Forces today!