The absence of your name from the deed doesn't disqualify you from signing for a home equity loan. If you are willing to put yourself on the line for a loan, you can be a co-signer. But don't think this puts all the risk on the other guy. He can lose his home, but you will still face financial consequences if the loan goes bad.
Reason to Co-sign
You can co-sign a loan to help a friend, family member or business partner acquire a loan when he can't qualify on his own. Lenders calculate a debt-to-income ratio when underwriting a loan. If more than 40 percent of a borrower's income is reserved for paying debt, it is difficult to get approved. If you have strong, steady income and minimal debt, you can co-sign the loan so that your income can be considered to qualify for the loan.
In the lender's eyes, you are just as responsible for the loan as the primary borrower. If your spouse is the primary borrower, you'll likely contribute to the monthly payments even if it's only his name on the deed. If you've co-signed to help a friend or family member, he is probably going to be the only one making payments. You're just there to help him qualify. Your real responsibility comes in if he can't pay the loan.
Be very cautious before agreeing to co-sign a loan. If the loan goes bad and the lender decides to go the legal action route, you will be in its sights just as much as the homeowner. The lender can go after your money and assets. If you can't make those payments, it can ruin your finances, damage your credit and ultimately lead to bankruptcy.
If you want to be released from your responsibilities as co-signer, the lender must approve it. Make a formal request to the lender. The homeowner must provide updated financial information and authorize the lender to run a new credit report. The lender will review the borrower's credit to see changes since the initial loan application and calculate a new debt-to-income ratio. If the borrower can now handle the load by himself, the lender will allow you to come off as co-signer.
Carl Carabelli has been writing in various capacities for more than 15 years. He has utilized his creative writing skills to enhance his other ventures such as financial analysis, copywriting and contributing various articles and opinion pieces. Carabelli earned a bachelor's degree in communications from Seton Hall and has worked in banking, notably commercial lending, since 2001.