Occasionally with first time home buyers, the lender will ask for a co-signer or guarantor on a mortgage application. This happens for a couple of reasons – usually due to the applicant not having enough income to support the mortgage on their own, poor credit, insufficient employment history or an inadequate down payment. A co-signer simply adds strength to a deal.
The co-signer or guarantor needs to either have a high enough net income (income minus debt payments) to support the deal, or enough assets (like a paid-off house) to be able to guantee the mortgage. A co-signer is on the title, whereas a guarantor must be more credit worthy because they guarantee the full mortgage amount. If the applicant defaults on the mortgage (including bankruptsy), the c0-signer or guarantor is responsible for the mortgage and making mortgage payments.
So while a co-signer can be helpful in obtaining a mortgage for a first time home buyer, it’s also important to note that it’s not just a signature that’s being added to the mortgage – the co-signer or guarantor is completely responsible for the mortgage as if it was their own.
