The Responsibilities of a Co-Signer
Not everyone can be approved for a home on their own. If you have a poor credit history, an unsteady job, a high debt-to-income (DTI) ratio, a foreclosure or a short sale in your past, or if for some other reason you can’t get approved for a loan, one option is to use a co-signer. A mortgage co-signer is a second person who agrees to back up your loan, guaranteeing the lender that the loan will be repaid.
While a co-signer can give you the borrowing strength you need, this is a serious legal relationship that should be considered carefully. Your co-signer needs to be someone who will be approved by lenders, someone you trust, and someone who is willing to be involved in this agreement for the long haul.
Most people look to family or friends first. Although there are risks in this, there is a level of trust when you’re working with someone you have known for a long time. For married couples, a spouse typically acts as the co-signer for a mortgage. Sometimes parents, business partners, sisters, brothers, aunts, grandparents or long-trusted friends can help.
Your potential co-signer must have a strong credit history as well as good income. The co-signer must be at least 18 years of age and willing to have their income, credit history, credit score, assets and debts scrutinized by your potential lender. The bank will look at home ownership fees (insurance and maintenance) as well as tax costs, even if the co-signer will not reside on the property. If the main owner fails to make payments, not only is the co-signer financially responsible, but their credit history could suffer.
If you plan to use a co-signer, it’s best to have a formal contract that you both sign. It can serve as a protection for both of you and a reminder of the seriousness of this agreement. A real estate lawyer can help you and your co-signer draw up an agreement that specifies who will pay the bills, who will occupy the residence, and contingencies, like what happens if the main mortgage holder cannot make the payments. While you may not see the need to make this sort of formal arrangement with a family member, this document can serve as a record to keep the agreement on track long after the contract is signed. This contract can also help prevent worst-case scenarios. For example, a co-signer could use the property as collateral for another loan or could suddenly demand full ownership of your home or 50 percent of the property’s value.
Co-signing can be a great way to get into a home, but it requires a major commitment from both parties. Before you ask for a co-signer, be certain that you are financially prepared for home ownership. Ideally, the co-signer should never have to hear from the bank after the papers are signed.
Deena Weinberg contributed to this article.
RE/MAX REALTY CENTER, Real Estate in Wisconsin
Thank you for visiting our REMAX REALTY CENTER, Real Estate in Wisconsin website.
Please feel free to contact us for any of your residential or commerical real estate needs including an online market if you are a seller, or finding a home if you are a buyer.
Our real estate focus in the Waukesha County, Milwaukee County, Lake Country, Jefferson County, Dane County, Dodge County and Washington County areas. Several agents in the office also their IRES designation (International Real Estate Specialist) so they can assist you with all your real estate needs in Wisconsin, the USA or anywhere in the WORLD!
When you are seriously looking or just browsing at real estate in Wisconsin, RE/MAX REALTY CENTER, Real Estate in Wisconsin, is the BEST resource to help you with all your needs and questions, whether a first time home buyer, relocating to or from the beautiful LAKE COUNTRY area, looking to invest or explore foreclosure opportunities or just thinking ahead to the future.
Lisa Bear is the broker/owner of RE/MAX Realty Center, Real Estate in Wisconsin (262-893-5555) is an experienced real estate agent in Waukesha County and the entire Milwaukee Metro area. Lisa thinks "outside of the BOX" and encourages her agents to do so as well. If you want creative options and exceptional marketing and service - look no further!
The RE/MAX Realty Center Office, has experienced agents with expertise in luxury home marketing, lake property experts, foreclosure and short sale specialists, investment and property management brokers and commercial brokers.
Our agents areas of service include, but are not limited to:
The prospering communities of Waukesha County including Delafield, Waukesha, Oconomowoc, Pewaukee, Waukesha, Sussex, Wales, New Berlin, Dousman, North Prairie, Mukwonago, Chenequa, Menomonee Falls, Brookfield, Elm Grove, Okauchee, Eagle, Muskego and Merton.
Great municipalities in Milwaukee County including Milwaukee, South Milwaukee, Wauwatosa, Hales Corners, Greenfield, Glendale, Franklin, Bayside, Brown Deer, Cudahy, Fox Point, Greendale, Shorewood, Oak Creek, St. Francis, West Allis and Whitefish Bay.
The hometown favorites of Washington County, Jefferson County and Dodge County including Watertown, Hartford, West Bend, Germantown, Jackson, Richfield, Ashippun, Lake Mills, Jefferson, Johnson Creek, Slinger and Erin.
Lake Country Living on one of Waukesha Countys great lakes as a full timer or vacationer is a must and there are some great lakes to choose. Nagawicka Lake, Pine Lake, Oconomowoc Lake, Beaver Lake, Okauchee Lake, Pewaukee Lake, Moose Lake, North Lake, Lake Keesus, Lac La Belle, Upper Nashotah, Lower Nashotah, Upper Genesee, Lowe Genesee, Middle Genesee, Upper Nemahbin, Lower Nemahbin, Fowler Lake, Golden Lake, Pretty Lake, Silver Lake, Waterville Lake, and Crooked Lake. Great lakes of the surrounding area also include Lake Michigan, Rock Lake, Big Cedar Lake, Little Cedar Lake, Pike Lake and Lake Ripley.