What is a Cosigner?

• A cosigner agrees to take on the debt if the borrower cannot make his house payment. Cosigning a mortgage results in being equally liable for the house loan, although your name may not be included on the mortgage title. This type of help benefits the person who desperately wants to buy a house, but can't qualify without a cosigner due to credit problems.
  
  

Credit and Cosigning

• Even if you're willing to help someone and cosign their mortgage loan, the lender may review your credit and then decide that you don't qualify for a mortgage loan as well. Signing your name to loan documents as a primary borrower or cosigner requires acceptable credit. This typically includes a credit score no lower than 680 for conventional loans and a low debt-to-income ratio. How being a cosigner affects your credit score depends on the borrower -- your credit score can drop if the borrower starts sending payments late. However, if the borrower manages the account well and never misses a payment, positive updates from the lender can boost your score.
  
  

House Payment

• An important factor to remember when cosigning a mortgage is that you must have enough income to afford the payment. As the second person in line to make the house payment, your present income must allow room for an additional monthly expense. If you already have a mortgage in your name, or other monthly debt obligations such as student loans, credit cards or an auto loan, these can significantly stand in your way of cosigning. The lender may decide that you're overextended and can't afford to take on a new debt.
  
  

Cosigning Warning

• Cosigning a mortgage for someone before you've purchased your own home is risky. A lender may approve you as a cosigner because you don't have a previous mortgage debt in your name. However, when the times comes to apply for your own mortgage loan, the lender may reject your loan application, concluding that you can't afford this new debt. Removing your name as a cosigner in order to purchase your own property is not simple. The primary borrower must refinance the mortgage loan, and the lender will only remove your name if they can qualify based on their own credit and income.