What Does It Mean to Be a Co-signer on a Mortgage?

In today's world where there are higher home prices, many first time buyers, or younger buyers especially, are fortunate to have parents or grandparents to help them out financially.  There may be different reasons for seeking a co-signor on a mortgage loan, and sometimes there is another adult willing to help in that way.

According to an article by Lise Howe in REALTOR Magazine, 22.8 percent home purchase loans in 2017 included a co-signer, an increase from 2016 (data from ATTOM Data Solutions).

Frequently, buyers and sellers look to their Realtor as a source for answers during a transaction, but there are times we cannot advise when the question involves legal advice, tax advice, and other issues which are not included in a real estate license.  So a buyer and his/her co-signer really need to obtain advice and information about the responsibilities of being a co-signer.

So keep in mind, if you're a co-signer:

1. You are completely responsible for the loan payments if the buyer is unable to make payments.
2. The co-signer's credit report will reflect problems, if any, with the mortgage.
3. The loan affects the co-signer's own debt-to-income ratio, which could affect their own purchase plans in the future for borrowing capacity.
4. The co-signer's debts and financial information must be given to the lender as part of the buyer's loan process.
5.  Is your risk in the situation covered, i.e., your cash flow?

The decision for what type of mortgage to obtain is the buyer's responsibility, and it's the buyer's responsibility to search out their best options for borrowing.  So buyers, please talk to your tax advisors and a financial planner to make sure whatever you're considering fits into your financial capacity.

An option that does not involve co-signing is for the buyer to obtain help on the down payment only; with interest rates having dropped lately, buyers can qualify for more and possibly not need a co-signer. 

Please contact me if you would like more information about making a home purchase.  I have worked with many first time buyers in my 24-plus years of real estate experience!


Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996