What Is the Difference Between a Co-Signer & a Co-Borrower in a Home Loan?
Home loan applications may be denied if the prospective borrower has a limited or poor credit history. Under these circumstances, a mortgage lender may ask the loan applicant to provide a co-signer or a co-borrower in order to proceed with the loan.
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Co-signer Defined
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According to Loan.com, a co-signer is a person who agrees to attach himself to a loan or other debt in the event that the primary loan applicant does not qualify to receive funding on his own merits.
Co-borrower Defined
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Castle Investment Co.'s online "Lending Glossary" states that a co-borrower is someone who signs a loan note along with the primary borrower and, in turn, becomes equally responsible for a loan's collateral and payment. The co-borrower shares the title with the borrower.
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Credit Differences
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According to the "Money and Credit" blog at BlogSpot.com, a co-signer must have excellent credit and be able to qualify for the home loan on her own good standing. However, a co-borrower's income and credit record are taken into account along with the primary borrower's information when determining whether the borrower qualifies for a home loan.
Default Differences
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Once a co-signer attaches himself to a home loan, that person becomes legally responsible for repayment of the mortgage amount in the event that the primary borrower defaults on the loan. According to the blog "Money and Credit," a co-borrower and a primary loan applicant would be held equally responsible for a mortgage debt in the event of default.
Proceeds Differences
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Unlike co-signers, co-borrowers share in the proceeds of the loan; therefore, a co-borrower has an interest in the mortgage property.
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