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Can a Parent Co-sign on a Mortgage?

Parents are a preferred co-signer for San Diego mortgage transactions.

Parents are a preferred co-signer to young individuals due to high level of trust.

In any mortgage transaction, the first consideration of a lender is to ensure that the borrowers have the capability of paying off the loan granted to them. For the most part, proof of guaranteed income and credit history of the applicants is presented in order to be certain that there will be minimal risk of losing any money on the loan.

However, there are instances that the lenders will decide to reject the applicant’s request of mortgage loan due to the following reasons: (1) the applicant has bad credit; (2) the applicant doesn’t have any credit history at all; (3) the applicant has an unreasonable demand of money which the lender can’t grant; and (4) the applicant has an outstanding debt.

When an applicant begins the process of applying for a loan, he/ she still has the option of pursuing the mortgage loan as long as he/ she is able to secure the help of a qualified co-signer. By providing a guarantor of the contract as a co-signer, the lending institution will be more assured that the payments will be paid in a timely and dutiful manner.

Most of the time a person usually turns to his/ her relatives when looking for a co-signer. In fact, young individuals prefer their parents as co-signer in order to be secure that they will be unconditionally supported. Though for the most part, any person can be a co-signer for a mortgage loan of an individual as long as both of them have trust with each other. Basically, if the borrower fails to perform a payment, the lending company will try to extract money for payment from the co-signer. A company can also act as a co-signer for a mortgage loan. However, it generally extracts very high interest payments compared to an individual co-signer.

On the part of the borrower, he/ she needs to properly inform the co-signer on the nature of the mortgage loan and the responsibilities the co-signer should assume. The borrower needs to emphasize to the co-signer that the debt/ loan is taken up by both of them. In fact, the co-signer will pledge his/ her credit history to the lending companies when backing the loan. This is just proof that co-signing is a risky business to take that requires immense trust between the two parties. It should be taken seriously by any individual when trying to secure a mortgage.

Commitment is also an important factor involving in co-signing because the co-signer must be certain that his/ her borrower has the undying commitment to pay fully the loan/ debt. A person needs to put in his/ her mind that a default can certainly ruin both the life of the borrower and the co-signer, not to mention straining or possibly destroying the relationship.

Whoever your co-signer is, a person still needs to be responsible enough in any decisions he/ she makes. Basically, a person should not be dependent on his/ her co-signer; and in the case of parents, it is easy to become psychologically and financially dependent on them. The borrower must provide the co-signer a security towards the mortgage obligation. A co-signer only intends to help the borrower, and not to assume all the responsibilities of a borrower.

posted by admin, 7th June 2011 , Categories: Mortgages