Before you can get a mortgage, you’ll have to meet the lender’s requirements or your loan application might be denied. Adding a cosigner can help as long as you both understand the risks.
How can a mortgage cosigner help?
A cosigner is usually a relative or close friend who agrees to pay your loan balance if you default. Because a cosigner takes away some of the risk from the lender, homebuyers who wouldn’t otherwise meet the loan requirements could be approved for a mortgage.
A few situations when having a cosigner can come in handy are:
- If you have poor credit.
- If you have a high debt-to-income ratio.
- If you have limited employment history.
- If you’re self-employed.
A lender will consider your cosigner’s income, assets, liabilities and credit history as part of your application, potentially tipping the scale in your favor for stronger rates and better terms than you might be approved for on your own.
A cosigner typically stays on the mortgage long enough for a primary borrower to establish sufficient credit to take on the responsibility themselves. Unlike a coborrower, your cosigner promises to pay back the full balance of what you owe if you default.
Who can be a cosigner?
For most traditional mortgages, a cosigner can be anybody who’s willing to take on the risk of responsibility if you’re not able to repay what you borrow, including family, friends or advocates.
Some types of mortgages exclude cosigners who have a financial stake in the home you’re buying. For instance, FHA loans require your cosigner to be related to you by blood, marriage or law. The exclusion prevents agents and brokers from helping clients secure the homes they’ll get commission on.
What can’t a cosigner help with?
There are limitations to what a cosigner can help you with. A cosigner cannot:
- Eliminate your required down payment.
- Help you get a mortgage if your debt-to-income ratio is more than 43%.
- Help you get a mortgage if you don’t meet the minimum required credit score. Some exceptions may apply at the discretion of the lender.
- Help you get a mortgage if you have a history of foreclosure or bankruptcy.
What are the risks to your cosigner?
Asking someone to cosign a mortgage shouldn’t be taken lightly. It’s a serious financial commitment because the cosigner is responsible for paying the debt obligation if you can’t.
In addition to the potential strain that a bad experience could put on your relationship, the cosigner’s credit may also be affected if you’re unable to make payments.
Where can I find a good cosigner?
Your lender might have specific requirements about who is eligible to cosign for you, so start there. Some lenders might require that a cosigner is a family member or another creditworthy adult with who’s like family. Lenders might also require that your cosigner live in the same state as you and the property that you want to buy.
For FHA loans with less than a 25% down payment, the cosigner must be a parent or blood relative.
Some general qualities to look for in a cosigner are:
- US citizenship or be a resident alien.
- A close relative or friend.
- High credit score and income.
- Strong employment history.
- Low debt-to-income ratio.
Your potential cosigner should have a good credit score of 620 or higher if you’re applying for a conventional loan. You’ll need a cosigner with a score of at least 580 for an FHA mortgage. A low debt-to-income ratio and a reliable source of income can further leverage your cosigner into low rates and strong terms.
Can a retired person cosign a mortgage?
Yes. While all lenders require cosigners to have a source of income, retirement income counts and you could benefit from adding them to the application.
Compare mortgage lendersUse the form below to compare rates from multiple lenders on LendingTree's secure site.
Getting a cosigner on your mortgage can be beneficial if you’re having trouble getting approved for a loan or if you’d like a better interest rate. However, cosigners take on a considerable amount of risk, so be sure the person you choose is capable of taking on those risks. Once you’ve decided, be sure to compare your mortgage rates to find the right loan for you.
Frequently asked questions
More guides on Finder
Investing in your 40s: 8 ways to prepare for retirement
How to invest for retirement: 8 ways to safeguard your portfolio.
Work for yourself? You might qualify for a larger PPP loan
You can now calculate your payroll expenses based on gross income instead of net profit. Here’s how it works.
9 steps to make the most of your debt relief program
Reduce your debt by around 30% after fees — but only if you can stick with the program. Here’s how.
7 debt relief scams to have on your radar
Don’t be fooled by false promises — here are red flags to watch out for and tips to find a legit company.
Texas disaster assistance for the 2021 Winter Storm
Here’s where to get financial help for yourself and your business if you’ve been affected by the storm in February 2021.
Investing in your 30s: 8 wealth-building tips
Prepare to revamp your asset allocation and explore new investment classes.
Best and worst states for women in the US
How states compare on employment, earnings, poverty, education, health and wellbeing.
Smallest businesses finally get a fair crack at a PPP loan. Do you qualify?
The White House announced new changes to PPP loans, helping the smallest businesses and opening access to people with student loan defaults or nonfraudulent felony convictions.
How can you use your health savings account (HSA) as a retirement investment?
A health savings account (HSA) can help you get prepared for your retirement. Learn more.
Should I max out my 401(k)?
The rush of turning $19,500 into $1 million can be enticing, but it’s not always the best idea.
Ask an Expert