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Can you have a cosigner on a mortgage?

You’ve probably heard of a cosigner on a student or auto loan. Did you know that you can have a cosigner on a mortgage too? While not all loan programs are eligible for a cosigner, having one may improve your ability to get pre-approved for a mortgage. That’s because a cosigner’s income is included when your lender determines how much house you can afford.

The primary role of a cosigner is to help the borrower get approved, which can be helpful if you have no credit history. But a cosigner’s responsibilities don’t end there. The cosigner isn’t just providing a credit reference or vouching that the borrower will make their monthly mortgage payments on time. By signing a loan document, a cosigner is under a legal obligation to make any missed payments immediately if the borrower is unable to for any reason. In other words, the cosigner accepts responsibility to repay the debt on time and in full.

What to consider when getting a cosigner mortgage

Not everyone can cosign on a mortgage loan. If you’re applying for a mortgage with a cosigner, you both must meet the loan program’s minimum requirements. Also, your cosigner’s credit history, assets, debt-to-income ratio, employment history and income will be considered.

Before signing on the dotted line, your cosigner should know that their credit can be damaged if you miss mortgage payments. Also, cosigning a loan can impact their ability to get a home loan for themselves because cosigned mortgage payments may be calculated as part of a cosigner’s debt-to-income (DTI) ratio.

Top 5 questions about cosigners

If you’re looking to learn more, we’ve compiled a list of answers to the top questions about cosigners to help you decide if getting a cosigner is right for you.

1. Is there a difference between a cosigner and a co-borrower on a mortgage?

Cosigners and co-borrowers have in common that they take responsibility for paying back a loan. However, the cosigner is only liable if the primary borrower misses payments or defaults on the loan, while the co-borrower is expected to make payments from the start of the loan. Whether you choose a cosigner versus a co-borrower, you’ll apply for a loan together. Because they’re willing to be a borrower on the mortgage but will not live in the home, cosigners are often called “nonoccupant co-borrowers.”

Approval is based on your combined income and assets. Typically, the lower middle score from each applicant’s credit score is pulled from all three credit bureaus. Applying for a joint mortgage boosts your chances of getting approved. Although there’s no guarantee, it also may help you obtain a better loan rate. You may also be approved for a higher mortgage amount with a combined income. On the other hand, if one of you has a lower credit score or a high debt-to-income ratio (DTI), it may be best to apply for an individual mortgage.

2. Does a cosigner on a mortgage have any rights?

In addition to helping the borrower qualify for a loan, there is also a benefit to the cosigner. Paying the monthly mortgage on time builds credit and adds to the cosigner’s good payment history. However, despite being responsible for the required payments regardless of why the borrower isn’t paying, cosigners have no property rights or ownership interest.

3. Can my parents or my spouse cosign my mortgage?

A common scenario is cosigning a mortgage with parents or other family members, including spouses.

4. How do you get a cosigner off a mortgage?

To get a cosigner off a mortgage, you often must qualify for a mortgage refinance on your own. If interest rates have dropped since your loan closed, your credit score has improved, or you now qualify for a shorter-term loan, a refinance may be advantageous. If you’re considering refinancing, use the Guild refinance calculator to determine how much it can change your payment and when you’ll reach the break-even point. The break-even point is how long it will take for the amount you save with lower payments to outweigh the expense of refinancing.

5. Are there alternatives to a cosigned mortgage?

If you’re considering a cosigned mortgage because you don’t have a great credit score or have a high debt-to-income ratio, an alternative may be an FHA, FNMA HomeReady or FHLMC Home Possible loan. These affordable lending options are ideal for homebuyers with limited cash for a down payment and offer very flexible sources of down payments, including gifts and down payment assistance programs.

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.

By |Published On: April 21st, 2022|Categories: Guild Blog, Mortgage 101|Tags: , , , |

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About the Author: Guild Mortgage

Founded in 1960 when the modern U.S. mortgage industry was just forming, Guild Mortgage Company is a nationally recognized independent mortgage lender providing residential mortgage products and local in-house origination and servicing. Guild’s collaborative culture and commitment to diversity and inclusion enable it to deliver a personalized experience for each customer. With more than 4,000 employees and over 250 retail branches, Guild has relationships with credit unions, community banks, and other financial institutions and services loans in 49 states and the District of Columbia. Guild’s highly trained loan professionals are experienced in government-sponsored programs such as FHA, VA, USDA, down payment assistance programs and other specialized loan programs. Guild Mortgage Company is a wholly owned subsidiary of Guild Holdings Company, whose shares of Class A common stock trade on the New York Stock Exchange under the symbol GHLD.