co borrower and co-signer- what’s the difference?-

Co-Borrower and Co-Signer:What’s the Difference?

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When you do not qualify for aloan on your own, you mightconsider asking someone tocosign on the loan with you. Inaddition to a cosigner, however,is the co-borrower. While thetwo names sound synonymous,they are different, meaning thatthey are handled differently bythe bank and they both havedifferent ramifications in theend.



What is a Co-Borrower?In general, it is considered more beneficial to be a co-borrower than a cosigner. This is because co-borrower hasrights when it comes to the home because he gets halfownership of the home and his name goes on the mortgagedeed and title. As a co-borrower, all circumstances of his lifeare factored into the ability to get the loan. The bank will lookat the co-borrower’s credit history, income, employment andassets to determine your eligibility for the loan. When youhave a co-borrower, your income and assets are combined,but your credit is still looked at separately, especially if tryingto obtain a conventional loan; the lender will look at yourcredit scores separately, generally taking the lowest of thetwo average scores between the two of you to qualify you forthe loan.



What is a Cosigner?

A cosigner, unlike the co-borrower, does not have anyinterest in the property. This means that his name does notgo on the title and he does not have any ownership of theproperty. The co-signer is evaluated on his own todetermine whether or not he can cosign for your loan. Thelender will look at the same factors that he looks at for theco-borrower, including the income, assets, liabilities andcredit scores of the person applying with you. If the personis eligible on his own merits, he might make your loanapplication look more appealing and allow you to get theloan that you desire.



The largest downside of being a cosigner is the fact thatif the original borrower were to default on the loan, thecosigner is then liable for the debt. The mortgage,whether defaulted on or not, appears on the cosigner’scredit report, which could affect his ability to get his ownloans if his debt-to-income ratio is too high or if theoriginal borrower pays the mortgage late or does not payit at all.



When Bad Things HappenEven the most well-meaning borrower can have issueswhen it comes to paying his mortgage. There areunforeseen circumstances that can occur including losing ajob, having serious health issues or becoming completelyincapacitated – making it physically impossible to pay themortgage any longer. When this occurs, the cosigner isimmediately liable for the payments and for the entirebalance of the loan. This is one of the reasons that manybanks frown upon cosigners simply because it puts themunder a large amount of stress should something happen inthe future; something that they probably are not consideringat the moment when trying to help someone that they knowand love to get a mortgage.



Think Hard Before AskingYour intentions are likely innocent when you asksomeone to cosign on your mortgage if you are unableto obtain it on your own, but you are asking a lot out ofthat person. Asking someone to guarantee a loan thatyou are unable to qualify for on your own is very risk forthat person, no matter how honest or well-meaningyour intentions. Rather than asking someone to cosign,it is best to wait until you have a co-borrower orsomeone that will share the property with you and beable to contribute to the income and assets that qualifyyou for the home.



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Justin McHood is Americas MortgageCommentator and has been providing

Mortgage commentary for over 10 years.

INFORMATION PROVIDED BY: JUSTIN MCHOOD

MORTGAGE COMMENTATOR

Information Originally Published:January 24, 2015 BLOWNMORTGAGE.COM LENDER HOTLINE: 888-581-5008

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co borrower and co-signer- what’s the difference?-

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