Borrowing money for a piece of real estate is not an easy process—you need to be able to qualify for the loan and show that you have the means to repay the lender.
If you find yourself falling short of requirements, a co-signer or a co-borrower can help give you the boost you need. Here’s what you need to know about these different parties and how they can affect you:
Co-Signer: No Ownership Interest
Co-signers can be a big help if you do not have enough established credit to take out a loan. (Lenders will see you as a risky investment.) A co-signer who has better credit can help you obtain a loan. A common example of a co-signer is a student with little established credit getting a loan co-signed by a parent. A co-signer can be a parent, family member, or spouse.
A co-signer has no ownership interest in the property but does share legal responsibility for repayment. If you cannot pay back the loan, lenders can try to collect from the co-signer. Remember that a co-signer will become part of your credit history and debt-to-income ratio.
Co-Borrower: Responsible For The Loan
A co-borrower is an additional borrower whose name will appear on loan documents and property titles when they are signed for. They are evaluated the same as you are: employment history, credit history, income, and debt. Like a co-signer, a co-borrower can be a parent, family member, or spouse. They can also be a business partner if you are purchasing a business together.
Unlike a co-signer, a co-borrower has ownership interest in the property and both of you are responsible for paying back the loan.
Set & Stick To A Budget
When purchasing a home or business, it is essential to set a budget and stick to it. Getting pre-approved will also go a long way in helping make you a more attractive buyer.
The expert agents at Eric Merchant can help guide you through the course of purchasing a home and answer any questions you may have about starting the loan process.