When you’re applying for a mortgage, the lender is going to look at many things like your credit score, income, and debt-to-income ratio. In some cases, you may not have enough of a credit history or sufficient income to get approved on your own.
This is where having a cosigner can come in handy. A cosigner is someone who agrees to be responsible for the loan if you cannot make the payments yourself. Let’s take a look at some of the pros and cons of having a cosigner when applying for a mortgage.
What is a mortgage cosigner?
A mortgage cosigner is someone who agrees to be responsible for the loan if you cannot make the payments yourself. The cosigner essentially becomes a co-borrower on the loan and is equally responsible for making sure the mortgage payments are made on time each month.
What are the benefits of having a cosigner?
There are a few benefits of having a cosigner when applying for a mortgage:
- Improved chances of getting approved: If you have a cosigner with good credit, it can help improve your chances of getting approved for a mortgage. This is because the lender will see that there is someone else responsible for the loan who has good credit.
- Lower interest rates: Having a cosigner with good credit can also help you get lower interest rates on your mortgage. This is because lenders view cosigners with good credit as less of a risk and are more likely to offer lower interest rates.
- Larger loan amounts: In some cases, having a cosigner can help you qualify for a larger loan amount. This is because the lender will consider the cosigner’s income when determining how much you can borrow.
What are the disadvantages of having a cosigner for your loan?
There are also a few downsides of having a mortgage cosigner:
- Equal responsibility for the loan: One of the biggest downsides of having a mortgage cosigner is that they are equally responsible for the loan. This means that if you miss payments or default on the loan, the cosigner’s credit will be affected as well.
- Difficult to release a cosigner: Once you have a cosigner on your mortgage, it can be very difficult to release them from the loan. In most cases, you will need to refinance the mortgage in order to do so.
- Co-borrowing relationship: Having a mortgage cosigner also means that you will have a co-borrowing relationship with them. This means that if you default on the loan, they could foreclose on your home.
The bottom line on having a mortgage cosigner
As you can see, there are both benefits and downsides to having a mortgage cosigner. If you’re not sure whether or not you should get a cosigner, it’s important to speak with a mortgage lender to see if it’s right for you. If you need private lending or other assistance with real estate, contact us today to schedule a free consultation.
