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The Top Mortgage Mistake...and How It Could Help You

Feb 15, 2024
2 min read

What’s one of the biggest mortgage mistakes you can make?


Co-signing a loan.  Here’s why.


If you cosign for someone else’s loan, we have to include that debt in your monthly liabilities, unless we have a full 12 months’ documentation of someone else paying for the debt. This can tank someone’s debt-to-income ratios and make it much more difficult to qualify for a mortgage.


Even if you're not the one making the payments, any late payments or defaults by the primary borrower can tarnish your credit score. This can have far-reaching consequences, affecting your ability to secure credit for yourself in the future.


Co-signing is a commitment that lasts for the duration of the mortgage term. Extricating yourself from this responsibility can be challenging. Getting released from the co-signature typically requires refinancing or fully paying off the loan.


Before agreeing to co-sign, it's crucial to assess your own financial stability, understand the potential risks, and ensure that you're comfortable taking on the shared responsibility. In the intricate dance of financial decisions, being aware of the dangers of co-signing a mortgage allows you to step cautiously and make informed choices.


So what about asking someone else to cosign on your loan?


We can then use that person’s income to help you qualify, but we also have to include their monthly liabilities as well. You also need to take stock of your personal budget. You may be able to qualify for a higher mortgage payment with a cosigner, but who will be making the monthly payments? Will that put too much strain on your day-to-day finances?


For borrowers who are still building their credit or recovering from previous financial challenges, having a co-signer can be a valuable way to access credit. Making timely payments on the loan can contribute to positive credit history for both the borrower and the co-signer.


Having a co-signer can open doors to financial opportunities that might otherwise be challenging to access. It serves as a collaborative approach to obtaining credit, providing benefits to both the borrower and the co-signer. However, it's vital for all parties involved to approach this arrangement with transparency, responsibility, and a clear understanding of the potential risks and rewards.

 
 
 

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Jay Dacey Mortgage Team, Inc. NMLS ID # 1812066

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