If you’re worried about your ability to qualify for a mortgage, bringing in a co-signer might be an option to explore.
A co-signer is someone who applies for the mortgage with you, but doesn’t actually own the property, live in it, or plan to make the monthly payments. They do, however, share legal responsibility for the loan, and their finances are considered when evaluating your mortgage application.
This can make it both easier to qualify (especially if your credit score is low) and, in many cases, make your loan more affordable too.
Are you worried about qualifying for a mortgage? Here’s what you need to know about bringing in a co-signer to help.
What a co-signer can do for your mortgage application
Lenders look at all kinds of financial factors when you apply for a mortgage. They consider your debt-to-income ratio, your credit score, the size of the loan you’re applying for, and your employment. And when you bring in a co-signer? They look at that person’s financial profile too.
If you’re weak in one of those areas — credit score, DTI, etc. — having a co-signer who’s strong in that arena can help balance things out and make it easier to qualify.
A co-signer can also help you get a lower monthly payment and a lower interest rate, too (at least if they have good credit). That’s because borrowers with higher credit scores qualify for lower interest rates. So, if your co-signer has a particularly high score, it could mean a better rate, a lower payment, and a less expensive loan in the long haul.
How to choose a good co-signer
In most cases, a co-signer has to be a family member (parent, sibling, aunt, uncle, grandparent, etc.) or a spouse or domestic partner. Sometimes, you may be able to use a non-family friend or other connection, but it’s not as common.
You should also make sure your co-signer has good credit, low debts, and a strong history of making on-time payments (especially with their own loans and credit cards). Remember: The higher their credit score is, the better it is for your loan application — and your pocketbook.
Once you find a potential co-signer, make sure they understand the responsibilities and potential risks of signing your loan. If you fail to make payments, they’ll need to pick up the slack and cover those costs. If they don’t, it could hurt their credit, lead to collections attempts, or, worse, foreclosure on the property.
Still worried about qualifying for a mortgage? Want to learn more about adding a co-signer to your loan? Get in touch with Premier Nationwide Lending today for guidance.
Premier Nationwide Lending is an Equal Housing Opportunity lender. Sponsored by NTFN, Inc. 6201 West Plano Parkway, Suite 100, Plano, TX 75093 | NTFN NMLS 75333.