Can I Use a Cosigner on a Mortgage Loan?

Can I Use a Cosigner on a Mortgage Loan?

Not everybody is in the perfect position to qualify for a mortgage. If your credit isn’t in the best shape or you have other factors that are counting against you but are at a place in your life where you want to become a homeowner, one option you have is to use a cosigner in order to get approved for a mortgage loan.

What is a cosigner?

A cosigner is a second individual that puts their name on your mortgage. Basically, they are staking their credit reputation on your ability to pay your debt. If you do not pay your mortgage payments and you default, then the cosigner will be held responsible for paying what’s owed.

Cosigners are more commonly used for smaller purchases, such as for vehicles, but they can be used for homes mortgage loans as well. One of the reasons that they weren’t used as often in the past was because qualifying for a mortgage was a little easier before the housing market fell off during the economic downturn.

Why use a cosigner?

There are a number of reasons why you might want to consider having a cosigner if one is available to you. The following are a few situations in which a cosigner can be beneficial:

  • If you’re of a younger age and you’ve only just begun to establish your credit but are financially capable of purchasing a house and paying your monthly mortgage payments.
  • If you’ve recently experienced a financial setback but are back on your feet and shouldn’t have problems paying a mortgage. For example, you recently went through a stretch of unemployment or you went through a divorce in which your spouse ruined your credit.

In some cases, you may want to use a cosigner even if you are able to qualify for a mortgage loan. This is because the use of a cosigner can help you obtain better mortgage terms, such as a lower interest rate, a higher loan amount or a smaller down payment.

Just keep in mind that if your credit is extremely poor, then a cosigner may not help. Lenders will often make their decision based on who has the poorest credit score of the two – the primary borrower or the cosigner. This means that if you have a foreclosure or a bankruptcy on your record, having a cosigner might not help.

Who to use as cosigners?

Most borrowers will look to their family to act as cosigners, such as their parents – especially younger borrowers who are just starting out. Sometimes, adult children will cosign for their parents if their parents have just retired. You should always make sure to use a cosigner that you can trust and vice versa.

Be careful about using friends as cosigners as you can end up ruining your relationship if you default on your loan.

Apply for a Mortgage Loan in Maryland Today!

For more information about cosigners or applying and qualifying for home mortgage loans in general, be sure to contact Alex Echeandia at Eagle Creek Mortgage today.

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