Good credit is one of the requirements in applying for a mortgage. Unfortunately, not everyone is able to attain the credit rating standards set by lenders, especially those who are just starting to work. Co-signing a mortgage is one of the options being offered to buyers who are unable to apply for a mortgage because of bad credit. Should you consider being a co-signer for a family member, relative or friend?
Co-signing a mortgage is one of the most popular options for those who are unable to submit a mortgage application because of bad credit. This scenario often takes place between parents and their children, especially those who are just starting up on their careers or those who are starting their own families.
While it is definitely a good thing to lend a helping hand to those in need, Realtor.com notes on exercising extreme caution when it comes to co-signing someone else's mortgage, whether it be your son or daughter, or your best friend.
The publication notes that one should "think like a lender" instead of looking at the situation as someone with emotional and relational ties with the borrower. This way, you can save yourself from a lot of headaches should the borrower fail to commit to the mortgage payments on time.
"Before you commit, think like a lender and look at the borrower's income, work history, and existing debt to determine if the borrower is worth and not a potential liability to your good credit," said Frank Tarala, owner of Sterling Heights.
As previously reported here on Realty Today, one of the ways you can celebrate paying off your mortgage is by helping your children, relatives or friends with their mortgage payments.
However, it is also important to exercise caution and see if you and the borrower are good candidates for the said mortgage application. You may also protect yourself from pitfalls by including your name on the title of the home or applying for the loan as non-occupant borrowers, which will save you some money on taxes.
