What You Need to Know About Cosigning a Mortgage

Using a Cosigner for a Mortgage: What You Need to Know

If your credit, debt, or income makes it hard to qualify for a mortgage, you might think about asking someone with stronger finances to help. A non-occupant co-signer can strengthen your loan application, but you should understand how this choice affects both of you.

What a Cosigner Agrees To

A cosigner takes on full responsibility for the mortgage. If you stop making payments, they must pay the loan. This makes cosigning a serious commitment, especially for someone who will not live in the home.

When Lenders Allow Cosigners

Lender rules vary, and only certain mortgage types allow cosigners.

Conventional Loans

Both borrowers sign the loan documents, but only the occupant must be on the home’s title. The lender reviews the credit scores, debt-to-income ratios, and financial details of both people.

FHA Loans

Both borrowers sign the loan and appear on the title. FHA also limits who can act as a cosigner. Allowed cosigners include parents, grandparents, children, siblings, aunts, uncles, in-laws, spouses, partners, and close friends. Close friends must provide extra documentation to show the relationship.

Important Questions to Discuss First

Before you ask someone to cosign—or before you agree to cosign—talk through these points:

• Will the cosigner have access to the mortgage statements to confirm payments?

• Will the lender send payment notifications to both people?

• At what point should the cosigner step in if a payment is missed?

• Can you set aside a few months of payments for emergencies?

• How will you communicate to avoid stress or damage to the relationship?

Alternatives to Using a Cosigner

If you need help qualifying, you may have other options:

• Low or no down payment loans, such as FHA, VA, or USDA

• State or local first-time homebuyer programs

• Affordable housing and down payment assistance programs in your area

These options may help you buy a home without involving a cosigner.