When it comes to getting a mortgage to purchase a home, the question of a co-signer often arises. One may want to consider some things to determine whether a co-signer is needed or wanted when getting a mortgage loan. Whatever is decided though, the decision to take on a co-signer should never be taken lightly.
A major factor to consider when deciding if one needs a co-signer or not is to think about how strong their relationship is with their possible co-signer. A co-signer is committing to pay back a loan if the primary signer is unable to do so. This is a major commitment and has the possibility of severely damaging a relationship if anything goes bad over the course of the mortgage loan.
Besides thinking about the strength of the relationship with a co-signer, one needs to consider if a co-signer is really needed or not to get a mortgage. In certain circumstances, such as where the primary signer of the mortgage loan is self-employed, a bank or mortgage company may require that there be a co-signer in order to better protect their interests in the loan. In this case, the primary signer may need to take on a co-signer in order to obtain the loan needed to purchase the property they desire.
While some banks and mortgage companies may require a self-employed person to have a co-signer in order to open a loan, there are other options that can be utilized to help the situation not need a cosigner. One way that can be used to stem the need for a co-signer is for the primary loan signer to offer the bank or mortgage company a considerably larger down payment than would be regularly required. Most banks and mortgage companies typically require a down payment on a mortgage loan of somewhere between 15 and 20 percent of the total purchase price. If someone looking to take on a mortgage can offer a down payment of between 25 and 30 percent toward the purchase of a home, a bank can often be persuaded to waive their requirement for a co-signer on the mortgage loan.
In addition to offering a large down payment, one can bypass the need for a co-signer by choosing to find alternative financing for purchasing a property. By using alternative lenders that charge higher interest rates, one may find a lender who will give them a mortgage without needing a co-signer.
In the end, one needs to determine if the mortgage they are seeking is worth the stress that comes with finding a co-signer and keeping the co-signer’s interests protected by making the mortgage payments in as timely a manner as possible. All in all, a loan with a co-signer is going to be a touchier situation than a loan will be where the primary signer is the only one responsible for the loan.