Getting someone to agree to cosign on a mortgage with you means someone else has agreed to pay your mortgage for you should you no longer be able to do so. Yet while cosigning can help in some instances it’s not as pervasive a practice as it used to be. Lending guidelines have slowly pared back the benefits of cosigning sometimes to the point where it really doesn’t help very much after all. If you’re on the receiving end of such as request, it’s important to note that this is a real commitment and not something to be taken lightly.
When you agree to cosign on a mortgage, that information will very soon appear on your own credit report. You may not be making the monthly payments and perhaps over time you might have even forgotten about making that agreement but each and every month the primary borrower’s payment history on that mortgage is also being reported to your credit history. If for example the primary borrowers miss a payment and is made more than 30 days past the due date, your credit scores will be hit. Often without your knowing about it. Just make sure that when you agree to cosign you feel comfortable about doing so and looking at a recent credit report on those who are asking you for help.
Another way a cosigner can help is with additional income. Someone may have a temporary situation where income is lower than it normally is, or perhaps someone is buying a home but has yet to start the new job. Adding a cosigner can help with the additional income. But remember, with the additional income also comes additional debt from the cosigners. All income and credit obligations are added together.
One final note, a cosigner can’t erase bad credit of the primary borrower. If a couple applies for a mortgage and their credit isn’t up to par, in the past seeking out a cosigner could be an answer. Yet today, good credit from a cosigner doesn’t erase the bad credit of the primary borrower.