The process for obtaining a mortgage requires the buyer have a steady stream of income, a good credit history and enough available assets to help facilitate the transaction. Those who lack any of the required criteria often seek out a cosigner for a mortgage to help strengthen the application and chances of securing the mortgage. Though a cosigner is an option for many, problems can arise when utilizing a cosigner, and thus the pros and cons need to be weighed to determine if a cosigner is in your best interest.
Life changes that can occur for either the person living in the home or the cosigner can have an impact on the long term outlook of the situation. For example, if you cosign on a mortgage for a child and then later decide you want to purchase a vacation home; you may find that you have too much debt due to being attached to the mortgage for your child's house. This can pose problems and thus would need to be corrected prior to you being able to make the additional home purchase you seek.
Cosigning a mortgage places you in the same spot as the person listed as the primary borrower on the mortgage. This means that if, at any time, the borrower cannot afford to make the mortgage payments on time the negative consequences will have a direct impact on you as the cosigner. The cosigner will be responsible for all payments, late fees and penalties in the event the person who is responsible for making payments cannot or fails to do so. This can be trying if you have a tight budget and can pose problems as the late or skipped payments will be reflected on your credit history.
Financial Histories of All Involved
You may seek out or offer to be a cosigner on a mortgage if you see that one person lacks a good credit history yet has the income and cash on hand to secure the mortgage otherwise. Though this may seem as if you coming on board with your good credit to help secure the deal; if you bring along a lot of debt to the equation you may find that such situations can actually pose problems and thus throw the mortgage in to one with a higher interest rate, higher down payment requirement or even negate the application altogether.
One caveat that can pose problems when attempting to use a cosigner on a mortgage is based on the type of mortgage being assumed. For instance, government sponsored mortgages such as those offered through the Veterans Administration or through HUD may require all borrowers listed on the mortgage reside within the home. In such cases, cosigning for a house you do not intend to live in can make the option null and void.
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