Sharing a mortgage with family
If you’re considering asking someone to be a co-borrower or co-signer on a mortgage, be sure to discuss the loan terms carefully and ensure that they understand the responsibility.
Benefits for you and your parent co-signer
When your parents co-sign your mortgage, they essentially lend you their creditworthiness and financial stability. In addition to helping you qualify for a loan and increasing the chances of loan approval, there are also some advantages for co-signers. For example, paying your monthly mortgage on time builds their credit and adds to their good payment history.
Co-signing a mortgage comes with responsibility. A parent co-signer isn’t just providing a credit reference or vouching that you will make your monthly mortgage payments. In addition to the risks below, by signing a loan document, a co-signer is legally obligated to meet any missed payments immediately if you cannot.
- Credit score: If you can’t make the mortgage payments, it could hurt your parent’s credit score, making it harder for them to qualify for loans or lines of credit in the future.
- Financial stability: Missed mortgage payments can strain your parent’s finances, particularly if they’re retired or on a fixed income.
- Increased responsibility: Despite being responsible for the monthly payments, your parent has no property rights or ownership interest in your home.
Having a parent co-sign your home loan is a big decision. Carefully consider the potential risks and benefits and clearly understand your responsibilities before moving forward. Your loan officer can help you figure out which options would make the most sense for you.