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.