Imagine this: You get a modest windfall of cash, and it's just enough for a down payment on the starter home you've always wanted. What's more, the current real estate market is a buyer's dream, with houses going for pennies on the dollar in some cases. With great excitement, you call up your friendly neighborhood mortgage broker and tell him the great news -- you're ready to buy a place of your own. He asks you a few questions, and within minutes, you're feeling completely deflated. It seems that with your financial history, the only way you'll qualify for a mortgage is to get a co-signer.
Can't identify with that scenario? How about this one: You get a phone call from a good friend, and he asks you to co-sign a loan to help him buy a house. You may have heard the term "co-signing," and you may have even done it already at some point in your life, like when you and your roommates rented an apartment. Mortgage co-signing is when you and another person jointly apply for and carry a primary or even a second mortgage. Going in together on a house may seem simple, but typically, it's rather complicated. It involves entering into a long-term, legally binding agreement with the co-borrower, the bank and other entities, like the local government where the property is located.
Some people advise never co-signing a mortgage for a number of reasons, which we'll explore in this article. Yet, others stand behind the notion of co-signing because it provides additional options in buying or refinancing a residential property. The most important thing to keep in mind if you're considering being or getting a co-signer is this: Know what you're getting into.
We'll explore the ins and outs of mortgage co-signing in the next pages.