Cosigning Mortgages and Home Loan in Green Bay, Wisconsin
Cosigning a mortgage might be more common than you think especially in the situation where a parent might agree to cosign a mortgage for their child who wouldn’t be able to obtain a mortgage or buy a house with a cosigner on the home loan. It can be difficult for first time home buyers to get a mortgage. Some of the difficulties could involve lack of credit history, bad credit, strict lending regulations, or amount of student loans. A cosigner effectively takes responsibility for the mortgage if the recipient of the loan defaults (doesn’t make the loan payments) on the loan. This responsibility is a legally binding contract and the lender can pursue action against the cosigner if they don’t make the payments in the event that the primary signer defaults on the loan. Cosigners are responsible for missed payments. Cosigning is a common action taken to help family and friends obtain loans that they wouldn’t otherwise be able to get. In 2017 nearly one quarter of all home purchase loans included the use of a cosigner.
Risks of Cosinging a Mortgage in Green Bay, WI
Income, debt, financial situation, and credit scores from both the primary loan recipient and the cosigner are considered during the loan application process. Sometimes a cosigner is also referred to as a non-occupant co-client since they are not actually residing in the home that the mortgage was taken out on. The cosigner makes the loan more attractive to the lender because they are effectively guaranteeing the debt and taking responsibility for it. This responsibility will affect the cosigners credit score and debt to income ratio. Any late or missed payments will also show up on the cosigner’s credit report. This could affect future loan amounts and rates the cosigner might apply for. It will increase the cosigners debt to income ratio and decrease the amount that they will be able to borrow for the life of the loan. Any future purchases should be considered when agreeing to cosign a loan. Of course those circumstances will change if the primary signer and mortgage recipient sells the property or refinances the loan without the use of a cosigner. A cosigner will also have to provide the necessary paperwork for the home loan process. This typically includes bank statements, statements of current debt, tax returns, and paystubs.
Considerations of Cosigning a Mortgage in Green Bay, WI
Cosigning a mortgage certainly comes with risks and is a not a matter that should be considered lightly. Does the primary signer have the means to easily make the monthly payments? How reliable is the primary signer’s income? What is the character of the primary signer like? What has the primary signer planned in the event they are no longer able to make the monthly mortgage payments? Will they sell the property in the event they can no longer afford the mortgage? What condition will property be in at the time of sale? What will happen if the property decreases in value or the primary signer does not have enough equity in the property to pay the fees associated with the sale of the property? Will the primary signer be able to refinance into a loan without a cosigner and if they are how long will that take? What will happen to the relationship between the cosigner and primary signer should the primary signer fail to meet the obligations of the loan? All aspects need to be considered before agreeing to cosign a loan or requesting that someone cosign a mortgage. The expert loan officers at Executive Mortgage in Green Bay, Wisconsin can help you determine whether or not a cosigner is necessary and can help explain the pros, cons, and risks of cosigners. So contact Executive Mortgage today to discuss the details of cosigning.
Contact Executive Mortgage About Cosigning a Mortgage
If you want to explore how cosigning a mortgage could affect you contact us here at Executive Mortgage at 920-490-8823. The loan officers at Executive Mortgage are experienced with a variety of loans and mortgages and can find the best mortgage product for you and your situation.