Mortgage Co-Signers: Evaluating the Benefits and Pitfalls

If you are having trouble getting a home loan, it may be time to consider a mortgage cosigner. There is an overload of debt in North America today, due to the amount of irresistible credit card offers, low interest scams, and the unfortunate people who keep trying to pay off one line of credit with another. Don't feel bad of you fall into this category though; you are in good company! Many people fall into the trap of credit debt, and have still been able to successfully buy a home of their own. There are a couple of ways to do this, but the easiest way is getting a trusted friend or relative to help out.

What Cosigning Does for you

When your credit is not good enough to obtain a mortgage in your own name alone, asking someone with a better credit rating to sign their name next to yours is usually all it takes for your loan to be approved. The benefits of having a mortgage cosigner do not end with getting a mortgage - once this step has been taken, it is now your chance to rebuild your credit, so that you won't need a cosigner the next time around. Having someone cosign for you can increase the size of the loan you qualify for as well, depending on how good their credit is. Finding out that you can buy a better or bigger house than you originally planned for can be exciting, but make sure you know what you are getting into; you will have to carry the mortgage by yourself, and you definitely don't want to ruin your cosigner's credit by overspending!

The Pitfalls of Cosigning

The pitfalls or cons of cosigning weigh a lot heavier on the cosigner's side. It is an obvious risk to cosign a loan as big as a mortgage, no matter how well you know the person. Take as much time as you need to think over the decision before giving any answers to the person asking for your help. Ask yourself these questions.

  • How well do you know this person? Even if you are in a relationship with them, do not skip this question! Really evaluate your relationship with them and think about their past - if they need your help in this area they have obviously made mistakes with their credit.
  • How well do they learn from their mistakes? Some people never learn, while others view mistakes as a chance to learn and move on. Don't be a mortgage cosigner for a person who has a habit of not learning from past errors.
  • Can you trust this person to be completely open and honest with you? Your credit rating is on the line here, and will remain on the line until your name is no longer needed. If the person you are signing for is able to come to you in times of trouble and tell you that they will need some help this month coming up with the mortgage payment, chances are, they will be honest with you.

The only pitfall concerning the person receiving help is that they will be bound to their mortgage cosigner for a long time. No one likes to be indebted to anyone for very long, but a mortgage lasts for many years. However, if you work on your credit, you should be able to take charge of your mortgage on your own after a few years.