Are you thinking of buying a home with a cosigner? Here are a few pros and cons to going that route.
Pros to Buying a House with a Cosigner
The first and most obvious advantage you get by having a cosigner is the ability to buy a more expensive home.
For example, maybe you could qualify for a mortgage of up to $250,000 if you bought a home with your income alone, but by having a cosigner, maybe you’d qualify for up to $450,000 for the mortgage.
This can be helpful a number of different ways:
- If you’re buying homes as rentals, you may be able to buy twice as many with a cosigner
- Perhaps you know you’ll rent out part of the house to roommates, and buying a bigger house means you can have more rooms to rent out
- It could be you want a home in a particular high-cost neighborhood, and having a cosigner makes that a possibility
Another advantage to buying a house with a cosigner is you are lowering your risk of loss. If your name was the only one on the dotted line, it’s all on you. A few bad months – which all of us have from time to time – could really stretch you thin and possibly make you lose the property. By having someone else (i.e. the cosigner) foot the bill, you can keep the property.
Having a cosigner also gives someone who loves you the chance to help you. Maybe the cosigner is your parent or sibling who knows things have been hard lately and want to help you buy a home. They may be happy to do so, since it’s a way for them to “put their money where their mouth is” and help their family member.
Finally, let’s not forget the obvious. It might be that you can’t buy a home without a cosigner. Maybe your credit isn’t the best or you have a high DTI. The biggest advantage to having a cosigner is that even though you couldn’t qualify alone, now you can finally buy your own home!
But while these are great things, let’s not forget about the cons of having a mortgage cosigner.
Cons to Buying a House with a Cosigner
Have you ever heard that you shouldn’t do business with friends or family? There’s a reason for that. The problem is that money is an emotional topic and has been ripping loved ones apart for centuries.
If you buy a house with a cosigner on the mortgage, they’re putting their hard-earned dollars on the line for you. If you miss a payment, it’s on them to pay.
The reason why you missed the payment doesn’t matter. The fact is they have to cover your bill, which can make them frustrated and strain your relationship with them.
This is especially true if they aren’t on the title of the property. Technically they can be a cosigner on the loan but not own part of the property, meaning they have very little upside in the deal.
Is Signing with a Cosigner a Good Idea?
There are several pros and cons to having a cosigner on your loan. If you want someone to talk you through it some more, send us an email at firstname.lastname@example.org and we’ll find a good time to talk.