How to Finance a Home With a Cosigner
Applying for a mortgage loan with a co-signer who has an established credit history can help lower your interest rates and reduce your monthly repayment amount. While many people are hesitant to co-sign a loan agreement, you can reassure a trusted family member or friend that there is some level of protection you can offer to ensure the person's credit rating is kept safe.
Other People Are Reading
Instructions
-
-
1
Choose a co-signer with a favorable credit rating. To determine eligibility for a mortgage loan, lenders consider your income and credit file. If your credit rating is low, a co-signer can offset the lender's risk by agreeing to appear as a second signatory on the loan agreement.
-
2
Make sure your co-signer understands the basics of co-signing a loan. Explain that as a co-signer he assumes complete legal responsibility for the loan balance if you stop making payments on your mortgage for any reason.
-
-
3
Complete a mortgage loan application. Lender requirements vary considerably, but most require all applicants to show proof of identity and provide a Social Security number. Grant the lender access to your credit file by checking the appropriate box on your application. Have all parties sign and date the mortgage loan application to complete the application process.
-
4
Minimize risk for your co-signer. The Federal Trade Commission advises all co-signers to request written notification if a borrower doesn't make a payment. Ask the lender if you can restrict your responsibility to the value of the loan itself, and not late charges or other collection fees. Not all lenders will implement such protections, so ask in advance.
-
5
If you consistently make your payment on time every month, you may be able to refinance the loan at some point in the future. Refinancing the loan can free up your co-signer's credit line and allow you to take full responsibility for the loan.
-
1
Tips & Warnings
Saving a down payment of at least 20 percent may eliminate the need for a co-signer.
Co-signing a mortgage loan is a serious decision. If your co-applicant stops making payments, you must repay the loan balance or risk having your credit file drastically suffer.
References
- Photo Credit Jupiterimages/BananaStock/Getty Images
More Like This
Comments
-
cb7000
Jan 03, 2011
This article is a down right scam leading people to believe it makes sense at all to ever sign your name on a loan you do not have control over!! Wake up.
