A new home is an incredible dream for so many consumers, and some won’t get the opportunity if they do not have enough credit. Lenders will review the applicant’s credit scores and history to determine if they are creditworthy. When an applicant hasn’t established enough credit, they will need a co-signer to help them get a mortgage. This can become a tricky situation for some home buyers, and they should become well-informed before signing a contract.
Why A Lender Requires a Co-Signer
Obviously, if the applicant doesn’t have enough credit established in their name, the lender will require a co-signer. However, there are other circumstances where a co-signer is needed. Some lenders will require a co-signer based on the age of the applicant and if they do have credit yet their credit scores are lower than average. The co-signer must have more credit and higher credit scores to secure the loan. Some lenders will not extend a mortgage to an applicant under at least 21 years of age without a co-signer.
The Responsibilities of the Co-Signer
Essentially, the co-signer is just on the contract to secure the mortgage. However, by co-signing a mortgage, they are also responsible for the loan payments if the other borrower doesn’t pay the payments. It is a major responsibility to become a co-signer, and they should never make the decision lightly. Borrowers can get tips from Dustin Dimisa about co-signing for a mortgage.
Can the Mortgage Affect the Co-Signer’s Credit?
Yes, the co-signer’s credit will be affected by the mortgage, and if there are late payments, it will reflect poorly on their credit history and scores. It is best to co-sign with an individual that is responsible that the co-signer trusts to pay the payments in a timely manner.
What Happens If the Borrower Defaults on the Mortgage?
If the original borrower defaults on the mortgage, the property goes into foreclosure. The foreclosure appears on their credit report and the credit history of the co-signer. This could prevent either party from buying a home for several years, and the lender can file a lawsuit against both parties to collect the outstanding balance.
Who Is Listed on the Property Deed?
Initially, the property deed that is created for the property will have the names of the original borrower and their co-signer on it. However, once the full debt is paid off, the co-signer can sign documents to relinquish ownership of the property to the original borrower. Under the circumstances, a new deed will be created by a title company, and some fees may apply. They can also add a clause in the mortgage contract that the original borrower’s name is the only one to appear on the official deed.
The dream of homeownership has many consumers gearing up for this major investment. They plan for the investment ahead of time and complete market research to find the best property. They also evaluate mortgages to avoid higher than average costs. However, if they do not have enough credit, they will need to get a co-signer to help them secure the mortgage. Buyers can learn more about buying a home with a co-signer by contacting a lender.