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Co-Signing; Risks and Benefits

“Co-Signing” pops up all the time for us now. We frequently need co-signers for our FHA Buyers, and for our Conventional Buyers with 20% down. We also have numerous borrowers who have co-signed for someone else.

If you co-sign for a mortgage, you are on the hook for that mortgage for as long as it exists whether you live in the property or not, or whether you remain on title or not.

Hence, if the occupant/beneficiary of your co-signing misses payments or ends up on in foreclosure, your credit will be impacted the same as if you were the primary borrower.

Almost always, however, the occupant/beneficiary feels a tremendous obligation to the co-signer and never misses a payment. And in these cases, co-signing can actually help one’s credit over time as balances get paid down and payments are never missed.

Further, if a co-signer ever applies for an additional loan or credit of her own, she can get “12 canceled checks” from the occupant/beneficiary to effectively prove to creditors that someone else is making payments. This co-signed debt will then not be used against the co-signer for debt ratio purposes.

These are all reasons why we encourage the use of co-signers to help borrowers with good credit histories.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167