• Client Info
  • Realtor Info
  • Seller Login
  • Contact

Boulder Property Network

Boulder Property Network

Boulder County Real Estate

  • Home
  • Search Real Estate Listings
  • Duane’s Timely Topics
  • Results Count
    • Why We Work by Referral
    • Testimonials
  • Our Team
    • Timmy Duggan
    • Barb Passalacqua
    • Kelsey Jensen
    • Duane Duggan
  • Real Estate Blog
You are here: Home / Boulder Real Estate Blog / Co-signing a Mortgage for a Relative — Should I or Should I Not?

Co-signing a Mortgage for a Relative — Should I or Should I Not?

February 1, 2019 by The Boulder Property Network

 

As prices of homes have increased steadily, it has been more difficult for first-time home buyers to enter the real estate market. Often first-time home buyers will turn to relatives to help with a down payment or co-signing on the loan. However, all parties involved need to go in with their eyes wide open before agreeing to this type of arrangement. To do this, first meet with a qualified mortgage loan officer to determine what a buyer might qualify on their own and then what they would qualify for with a co-signer. Next, it would be wise for both parties to meet will a financial planner to make sure they are on the right track with their decisions. The financial planner can help determine if the overall transaction is realistic. Often the primary borrower will end up borrowing more than they can really handle, then the co-signer is asked to step in to help out – and that can put a strain on their relationship.

It is important for the primary borrower to know what they are asking of a potential co-signer and also for the co-signer to have an understanding of what they are getting into.

Here are a few items to discuss between the co-signer and the primary benefiting buyer:

  1. Co-signing a mortgage will affect your credit. If the person you are co-signing for doesn’t make the payments, it will be reported to both party’s credit report. This could lower the co-signer’s credit score and affect their ability to get a loan of their own. Make sure you feel comfortable being responsible for making the payments if the other person doesn’t.
  2. Speaking of responsibility, as a co-signer you are “jointly and severally liable” for the loan. This is a fancy way of saying that if the person who is the beneficiary of you being a co-signer suffers a job loss, you are responsible for making the payments if you want to maintain good credit.
  3. As a co-signer, the loan will be added to your total debt ratio. If you are not planning on applying for a loan of your own anytime soon, that may not matter to you. However, if you are, the co-signed loan will figure into your total debt payments and might affect your ability to qualify for a loan. According to Jessica Shanahan, mortgage loan officer at Premier Lending in Boulder, once the loan has seasoned for a year, the monthly debt will no longer be considered if the cosigner is applying for another mortgage.
  4. Get ready for a loan application! Often co-signers think all they will be doing is signing their name at closing. Not true! A cosigner will be required to go through the same loan application process as the primary borrower. That means providing all your financial information to the lender for them to assess your credit worthiness. This can be a significant and time-consuming experience.
  5. Think back to the initial meeting with the mortgage loan officer and financial planner. Now consider whether or not co-signing with the primary borrower is really a benefit. If the proposed payments are more than the primary borrower can afford, you will likely be called upon to help with those monthly payments. This is fine if you are prepared to do so and can handle it.

Other options to consider when helping a first-time home buyer or anyone needing help:

  1. Consider gifting enough down payment so that the loan amount is low enough for the primary borrower to qualify on their own. If a borrower can come up with 20% down payment, they can also eliminate private mortgage insurance on conventional loans, making it easier to qualify.
  2. Consider buying down the interest rate to lower the payment to a level where the primary borrower can qualify on their own.

_________________________

About Duane Duggan: Duane Duggan has been a Realtor® for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed by RE/MAX International: the Lifetime Achievement Award and the Circle of Legends Award. Living the life of a Realtor and being immersed in real estate led to the inception of his book, REALTOR® for Life. Also see his video podcasts about real estate topics on RE/MAX of Boulder’s YouTube channel.

For questions, email Duane at DuaneDuggan@BoulderCo.com or call 303-441-5611

Filed Under: Boulder Real Estate Blog, Duane's Timely Topics Tagged With: Boulder County Real Estate, co-signing loan, mortgages

Contact Us

  • This field is for validation purposes and should be left unchanged.

Blog Archives

Featured Listings

$199,700For Sale!1199 Brainard Lake Ward, CO 80481View Listing
Lot 12: $173,000 / Lot 13: $174,700For Sale!0 5th St (Lot 12 & 13)Nederland, CO 80466View Listing

See all of our listings.

Recently Sold Properties

389,700Sold3365 Chisholm Trl B101Boulder, CO 80301View Listing
$2,997,000Sold3080 Galena WayBoulder, CO 80305View Listing
$649,700 Sold271 Jefferson AveLouisville, CO 80027View Listing
$628,700Sold170 Golden Gate Canyon RdBlack Hawk, CO 80422View Listing
$655,000Sold2323 Buttercup CtSuperior, CO 80027View Listing
$595,000Sold1513 Sepia AveLongmont, CO 80501View Listing
$873,000Sold5455 Lee Hill DrBoulder, CO 80302View Listing
$451,000Sold311 Windance RdEstes Park, CO 80517View Listing
$235,000 / 280,000Sold765 Pine St & 797 Pine StNederland, CO 80466View Listing
$770,000Sold705 Club Pl.Louisville, CO 80027View Listing

Tweets by BoulderPropNet

Download our App

Boulder Property Network AppGet the Boulder Property Network mobile app to start your search for a new home right from your phone or other mobile device!

Download it here >>

Neighborhood News Report

How's the market? We can provide you with accurate information on the real estate market activity (Listings , Sales & more) in the area you are most interested in!

Get your Neighborhood News here >

Free Home Valuation

Free Market ReportBoulder Property Network can provide you with the information that you need to make a plan for your real estate purchase or sale.

Get your home valuation >>

Looking to Sell?

Looking to Buy?

Information for Investors

Recommended Reading for REALTORS®

REALTOR® for Life

by Duane Duggan

realtor-for-lifeWhat does it take to be a REALTOR® for life? This book provides first hand knowledge from one of the most distinguished and active careers in real estate. Duane Discusses his newly published book here.

Purchase on Amazon

© 2023 Boulder Property Network • RE/MAX of Boulder Inc.
2425 Canyon Blvd. #110, Boulder, CO 80302
800-825-7000 x611

Boulder Property Network on FacebookBoulder Property Network on TwitterDuane Duggan on LinkedinOur listings on YouTubeDownload our Listings App
Site Map