Before You Co-Sign a Mortgage, Watch this first!

Hey guys, welcome back to another week of Mortgage Matters in Minutes. I'm your host Brent Rasmussen, owner of Mortgage Specialists. We've talked about this many times, but in over 25 years of lending, we've seen all kinds of scenarios, incidences, questions, borrowers, family, you name it. And we love to help each and every one of them by answering the question that I would want to be answering. is co-signing a good idea? and we get this question quite often because an individual themselves might not qualify or maybe a non-married couple wants to purchase a home together and they're just starting a date or they're going to get married or they're engaged. So explaining what the difference between a co-signer and a co-borrower is is really what we're talking about today because it can be very impactful on your life, your family situation, your finances, and your legalities of what you could be sued possibly for as well. So, let's get into it today. And please, before I forget, like and subscribe, comment below, ask a question. love to get information out that's factual to individuals in a short concise period of time. So before you cosign, what does a co-signer actually mean? I don't like the word cosigner because it makes it sound like you're just signing your name. That's all you're doing. When in essence, you truly are a co-borrower and a co-owner, meaning you're legally obligated on the loan. you're legally obligated on the property as well as an owner. So, if you become sued, that is an asset that could be taken away from you or penalized or something like that. Being a co-signer, it's not just a no big deal thing. It's a real serious situationship. And the reason why we're talking about today is because when people get together, they take on a loan together and situations come up. We've seen this hundreds and thousands of times in our career is that individuals will come to us and be on a loan together. Then they want to go their separate ways. And that's where we're going to chat about here next of what can be done and how can it be done. So how can a co-signing also affect you is first of all it can affect your debt to income ratio. Meaning now you're obligated for a payment. If you wanted to buy another property, you have to qualify possibly with both of those house loan payments depending on what the situation is going on. So, it's not just a payment that goes away and saying, "Hey, my sister pays it, my boyfriend pays for it, whatever the scenario is, but also where it can harm you is it can affect your credit score. If one person does miss the payment, not you, it's still going to show up on your credit report as a payment. So if the other person loses their job, becomes sick, passes away, something happens, it's still your responsibility to make that payment. You might say, "I'm just a co-signer. I don't want the responsibility." That's not how it works. If you are signing your name, you're obligating yourself as a full borrower and a full owner to the property itself. So usually when we see this happen, many times people will say, "My parents will cosign, my aunt and uncle, my friend will cosign." And this can affect family relationships, which we've seen in our office, that people decide they want to go down that path, and then later on in life, they don't want to be a co-signer anymore, but now maybe interest rates have increased. maybe the one borrower doesn't qualify, and that family member has to stay on that loan, which causes huge dynamics among family. And when I hear conversations or questions, I would always advise clients, do a gift, help the person with a down payment more than obligating yourself as a co-signer, co-borrower, basically because getting off that loan, the only way you can do that is to refinance or pay the loan off. And if the person cannot refinance for many reasons or doesn't want to refinance because interest rates are different, that's a completely now different scenario. and individuals choose to keep the lower payment or be told they're denied for a loan, that person that's on there as a co-signer stays on there indefinitely until the loan gets paid off. So, it can cause family, friend dynamic and stress that I've seen carry over moving forward because you have liability from day one all the way through the end. Whatever the end is, could be 30 years, 20 years, 15 years. There's a long time frame in between there. And what happens if someone comes on the property and hurts themselves, injured themselves, finds out the person that owns a property is legally liable for something. Now you're a part of that lawsuit as well because now you are an owner of that property and/or that is your asset on your balance sheet that people can go after to claim damages so on and so forth. So, when does cosigning really make sense? generally, I would see it when some people have a month or two to go before their wedding and everything's finalized. They're moving full forward straight ahead. I mean, it could mean your parents helped to cosign, but understanding all parties of what we've talked about in this video that the liability can continue from day one all the way until the end. So there's certain situations that may make sense and in certain situations we don't make the final say. We give you the facts and you get to decide what is the best scenario for you and your family where right now the way home prices are much of the time there needs to be two incomes to qualify. And we see a lot of people that are partners living together, boyfriend, girlfriend going to buy a house together and maybe something happens where they split up. That's where the challenge arises now on who can actually pay for the house, do we have to sell the house, are we splitting apart the house, what is all transpiring and that costs money. So co-signing isn't always negative, but there's a lot of things you want to be aware of before you sign your name with anyone on that dotted line. So I'm Brent Rasmussen, owner of Mortgage Specialists. Holler at me anytime with questions at 402-991-5153 or check us out on our website at mtg-specialists.com and we'll see you here next time at mortgage specialists for your mortgage matters and needs. Mortgage specialists driven, trusted, reliable.