Real Estate Tips from Bob Rich-Co-Signing Serious Business

A young couple wants to buy their first home. They both work, make good incomes and have enough money saved for the down payment. The problem is that they don’t have enough combined annual income to qualify for the home they want in the location they want. So, they ask their parents to co-sign a mortgage. In effect, they want to use their parents’ credit and income to qualify for the loan.

Parents should be advised that co-signing a mortgage is not a casual event. If the loan is defaulted, the co-signers are fully liable for the debt. So, it’s a matter of trust and faith in the young couple. This is a decision only the parents can make.

Even with a parental co-signer, first time buyers may be required to put up 5 or 10 percent of the purchase price with their own money. Some lenders also insist that the loan co-signers also appear as co-owners. This can lead to significant issues which require legal advise, a written agreement, and a will for each co-owner.