A mortgage cosigner helps someone with no or poor credit history qualify for a mortgage loan, but is not entitled to the property. They must provide the same financial information as the primary borrower and are legally responsible for payments if the borrower defaults. Late payments or foreclosure will affect the cosigner’s credit report and financial history.
A mortgage cosigner is a person who accepts financial responsibility for a mortgage loan if the primary borrower defaults. In most cases, people sign a mortgage to help a friend or family member qualify for the loan, which they couldn’t do without a cosigner, or to help them get a lower interest rate. In general, a bank will require the same financial information from a mortgage cosigner as the primary borrower. Unlike a co-borrower, a mortgagee is generally not legally entitled to the subject property, although any late payment or foreclosure will affect the mortgagee in the same way as the primary borrower.
It can be extremely difficult for someone with no credit history or poor credit to obtain a mortgage through a financial institution, especially if they lack a significant down payment. In many cases, a financial institution or bank will allow the primary borrower to use a mortgage cosigner to offset any financial hardship the primary borrower has had in the past. Having a cosigner can also allow the primary borrower to get a lower interest rate than he or she could on her account. This is typically only possible if the cosigner has a significantly higher credit score and debt-to-income ratio than the primary borrower.
During the mortgage approval process, the cosigner will need to provide the bank or financial institution with the same financial information as the primary borrower. Your credit report will be checked and your income will be verified. If the mortgage cosigner already owns another property, the income will generally need to be high enough for the cosigner to make both mortgage payments in the event the primary borrower defaults.
In most cases, a mortgage cosigner is not the same as a co-borrower. Although the cosigner has the same financial responsibilities as the primary borrower, he or she rarely has a claim on the property in question unless a legal contract states otherwise. Whether or not the cosigner lives on the property generally depends on the cosigner and the primary borrower. Unlike a co-borrower, where the income of more than one person is taken into account when determining how high of a loan one person can get, the income of the co-signer is not considered when determining the amount of the loan.
Acting as a mortgage guarantor is primarily for the benefit of the primary borrower. There are usually few financial benefits to the cosigner. If the primary borrower makes late payments or goes into foreclosure, the cosigner is legally responsible for the payments, and these instances will show up on your credit report or financial history, and could get you into legal trouble depending on your jurisdiction.
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