What Should You Know Before Using A Co-signer On Your Mortgage
If a borrower is struggling to qualify for a mortgage on account of insufficient credit or poor results after the stress test, using a co-signer can help convince a lender to lend to them. However, many people are not aware of what it means to co-sign on a loan and what is involved before, during, and after the process. This can lead to financial repercussions for both parties in the event of payment defaults.
Today, accredited mortgage professional Angela Milosevic is going to explain what it means to be a co-signer on a mortgage and the crucial aspects the co-signer and borrower must be aware of. Please keep reading for a complete understanding of what it means to get a co-signer on your mortgage.
Who is eligible for a co-signer?
A borrower with no credit or inadequate and sub-prime credit scores can use a co-signer to enhance their creditworthiness for a mortgage. The co-signer’s credit score will be utilized to apply for the mortgage, and they will be held responsible should the primary borrower become unable to repay the borrowed amount.
Who can be a co-signer?
A co-signer can be anyone the borrower knows, i.e., a parent, other family members, a friend, or even a colleague. However, the co-signer must be a legal adult with a steady income and a solid credit history. Non-resident Canadians can also co-sign a mortgage. It all depends on the lender’s terms and conditions.
According to the mortgage guidelines, the co-signer doesn't get any right to the property purchased with the mortgage money. They only share in the borrower’s debt and must assure the lender that they can balance out the weaknesses of the borrower with their strengths. For example, if the borrower has just begun their career, they will have a low income. As a result, their co-signer will need to be someone with a higher salary to balance the wage gap.
How to add a co-signer to a mortgage.
If a borrower plans to use a co-signer, the first order of business is to speak with a mortgage broker. A certified broker will help them determine their affordability and credibility. Once they have these numbers, they will know if they genuinely require a co-signer to strengthen their mortgage application.
If a co-signer is required, the borrower will need to fill out an application and have their credit bureau pulled. They will be expected to provide documents including but not limited to their pay stubs, bank statements, Notice of Assessments, property tax bills, mortgage statements on any property they own, etc.
Details to be aware of when using a co-signer
1. Both parties assume liability on the mortgage, which means that if the main client cannot pay their mortgage, the co-signer will need to cover the payments.
2. Missed or late mortgage payments will directly affect both credit bureaus.
3. Every bank has different regulations as to when they will remove someone from the mortgage. Before co-signing, both parties must familiarize themselves with the specific policies and have a long term plan.
For a leading mortgage broker in Cambridge, Ontario, to help you with your co-signer requirements, reach out to accredited mortgage professional, Angela Milosevic. I am an experienced mortgage broker and can help you figure out your affordability, and find you and your co-signer the appropriate mortgage. If you have questions or concerns about co-signing or the mortgage process in general, feel free to call me at (519) 240-1062.
I’ve been serving home buyers with suitable mortgage solutions for over a decade and have successfully helped numerous clients. With up-to-date knowledge of the mortgage laws and deep connections in the lending sector, I can quickly provide my clients with custom financial solutions. I can also help them find the perfect rates and ideal terms and conditions to ensure their future goals aren’t hampered.