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Should You Get a Cosigner for Your Mortgage? A Must-Read Guide
Jennifer Hernandez • January 15, 2024
If you're pursuing homeownership but encountering financial hurdles along the way, the idea of having a cosigner for your mortgage might have crossed your mind.
So, why would you consider having a cosigner? The primary reason often revolves around income. If your income alone doesn't quite satisfy the lender's requirements for the debt to income ratio, a cosigner can help bridge that gap. For instance, if you're a recent graduate with a limited income, having a family member or a close relation as a cosigner can significantly boost your chances of realizing your homeownership dream.
However, it's important to recognize that having a cosigner isn't a magical solution. They aren't just there to lend their name and vanish into the background. They have responsibilities too, including handling paperwork and undergoing the same financial scrutiny as you. Crucially, having a cosigner will still require ALL borrowers, including yourself, to have satisfactory credit. Lenders always consider the lowest credit score among all borrowers, meaning if your credit isn't in stellar shape, it could still pose challenges.
In this guide, we're here to debunk common misconceptions about cosigners, particularly the belief that they can miraculously erase or overlook bad credit. That's simply not the case.
Cosigner or Co-Borrower? There is a Difference
Now, let's delve a bit deeper into understanding what a cosigner is, ensuring we keep it clear and straightforward. So, what exactly is a cosigner, and how do they fit into your journey towards securing a mortgage?
The first crucial thing to understand, is that having a cosigner or co-borrower, the lender will have requirements that differ, depending on the loan type you are seeking. If your loan is an FHA loan, secured by the Housing Urban Development of the government, the requirements for a cosigner and co-borrower are more stringent. In fact, they must be an extremely close family member like a sibling, parent, step parent, or aunt or uncle. This is defined as a close family relation. The other type of common loan, Conventional, is more lenient in this aspect, so be sure to speak directly with a lender about the program you qualify for. If you are seeking a VA loan, which is a benefit for our veterans, there are no co-borrowers allowed other than the legal spouse.
A cosigner is signing only. They will provide income, asset and credit information, but will only appear on the mortgage note, not the title of the home itself. On the other hand, a co-borrower, is a borrower in entirety, and will also appear on the title of the home with the primary applicant.
These definitions are important as your support network decides how they would like to assist you. Many cosigners and/or co-borrowers will be concerned about their future qualification for a home of their own, if they co-borrower. My suggestion here is that they discuss thoroughly with your lender their finances, and potential future buying plans to be sure to have all of the facts straight before they commit.
Reasons to Consider a Cosigner
Now that we've covered what a cosigner is, let's dig into why having one could be a smart move. The most common reason people turn to cosigners is to boost their income. If your paycheck alone doesn't quite stack up to the lender's requirements for the dream mortgage you have in mind, a cosigner can come to the rescue.
Think about it this way: imagine you've just graduated from college, and you're all fired up to buy your first home. But there's a catch—your income is on the lower side, which might not align with what the lenders are looking for. It's a bit like having all the keys to your new home but missing the right one to unlock the door.
This is where a cosigner can step in and make a real difference. They bring their income and financial stability to the table, bolstering your chances of getting approved for the mortgage you need.
So, having a cosigner isn't just about having a safety net; it's a strategic move that can bridge the gap between your reality of homeownership and the reality of your current financial situation. In the next sections, we'll explore the roles and responsibilities of a cosigner and address some common myths about their impact on your mortgage journey.
The Role of a Cosigner
Now that you know why someone might become your cosigner, it's time to understand that they're not just there to nod silently in your mortgage journey. They take on specific responsibilities, which includes dealing with paperwork and having their financial situation carefully examined.
When you team up with a cosigner to apply for a mortgage, their financial background is put through the same thorough evaluation as yours. They should expect to provide pay stubs , bank statements and possibly other documents.
In the next section, we'll tackle common myths about cosigners to ensure you have a crystal-clear understanding of their role in your mortgage journey.
Common Myths About Cosigners
It's time to set the record straight on some misconceptions surrounding cosigners.
Myth #1. Having a cosigner can perform a magical vanishing act on bad credit.
In reality, this is not the case. Lenders play by a different rulebook—they always go with the lowest credit score among everyone involved in the mortgage, regardless of how impressive your cosigner's credit history might be.
Imagine you have a not-so-great credit history, and you're thinking that a cosigner with excellent credit will make all those past financial hiccups disappear. This is actually not the case. All credit is considered, and the lender will consider the lower of the borrower's credit score for the final decision of the approval. If you need to work on your credit, sooner rather than later is better. If you are not wanting to talk to a lender yet, but are curious to see the credit score that most resembles what lenders pull, visit MyFICO.com. Getting your credit score up could save you hundreds of dollars a month on your mortgage payment and thousands over the life of your loan.
The primary role of a cosigner is to boost the income qualifications for your mortgage application. In other words, they can assist you in meeting the financial requirements that might be a bit out of reach on your own.
Myth #2. Cosigners will later not be able to get a home of their own.
True that the loan they cosigned for will be considered when they are later applying for their own credit. However, in many instances, the lender is able to obtain proof that the mortgage is being occupied and paid by you. Most of the time, 12 month proof of your payment will need to be obtained, so be sure to keep good records and pay using a bank account. When cashier checks or money orders are used, this can pose a verification problem later on. In reality, this is not the case. Lenders play by a different rulebook—they always go with the lowest credit score among everyone involved in the mortgage, regardless of how impressive your cosigner's credit history might be.
Myth #3. Cosigners can be anyone.
As mentioned before, this definition of close family relation will differ between an FHA loan, and a Conventional loan. These are the two most popular loan types, but by not means the only ones. Be sure to check with a mortgage lender to discuss your situation, and if your cosigner meets the defined criteria for the program.
Myth #4. Cosigners can sign without their spouses knowing or also signing.
This is a big one. Depending on the state you live in, this answer will be different. In community property states, the cosigners legal spouse will also need to sign at closing. This does not mean they will be on title, but they must acknowledge they know of the transaction. In addition, for some loan types, like FHA, the spouse of the cosigners credit will need to be pulled as well. This is because the income of the cosigner must be able to carry all the debts of their household as well.
Myth #5. If paid late, the cosigners credit will not be affected.
All signers credit will be affected in the case of a 30 day plus late payment. So be sure that you plan to have open communication with them , in case of a hardship down the line. Communicating about things ahead of time will help you preserve the relationship, rather than paying late, and risking damaging relationships later on.
As we approach the final stretch of our exploration into cosigners and mortgage loans, let's wrap it up with some valuable takeaways. When you're considering whether or not to involve a cosigner, take a moment to weigh the pros and cons thoughtfully. Think about your finances and also the finances of your cosigner, your credit situation, and even your relationship with the potential cosigner.
Reaching out to a mortgage loan officer can be a game-changer. Mortgage professionals are experts at helping provide exact answers so that you and your family can decide if a cosigner option is right for you.
As you move forward in your homeownership journey, take a step back if needed, gather all the facts, and make decisions that are best for you. Homeownership is a significant milestone, and with the right information, you're well on your way to achieving that dream.
Our mortgage team would be honored to provide answers to your questions about cosigners to help decide if this is your path for purchasing a home this year. We can be reached at
www.loanwithjen.com/contact
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Buying a home is one of the biggest financial and emotional decisions you'll ever make. But how do you really know if you're ready? In this article, we’re breaking down five clear signs that you might be ready to buy a house—and one red flag that means you may want to wait. Whether you’re a first-time buyer or just testing the waters, this guide will help you move forward with clarity and confidence. Sign #1: You’re Financially Stable The first green light? Consistent income and job stability. If you’ve had a steady paycheck for at least two years (especially in the same industry), that’s a strong start. But it goes deeper than income: You should also have: An emergency fund covering at least 3–6 months of expenses Savings for a down payment (typically 3%–20% of the home price) Money for closing costs and moving expenses Pro Tip: Many buyers underestimate how much they’ll need after the down payment. Check out this mortgage planning article to avoid that mistake. Texas-Specific Tip: Texas has no state income tax—but property taxes are higher than the national average. Be sure to budget accordingly. You can estimate local taxes via the Texas Comptroller’s Property Tax site. https://comptroller.texas.gov/taxes/property-tax/rates/index.php Sign #2: You’ve Got Manageable Debt & Decent Credit Your debt-to-income ratio (DTI) and credit score directly impact your ability to qualify for a mortgage—and the rate you’ll get. A credit score above 620 is usually the minimum for most loan types The higher your score, the lower your interest rate—potentially saving you thousands over time If you're carrying high-interest debt, it might be wise to pause and reduce it before buying Your debt-to-income ratio is under 55%. Want to learn more? Watch How Your Credit Score Affects Your Mortgage . Sign #3: You’re Ready to Stay Put Buying a home makes more sense if you plan to stay in one place for at least 3–5 years. Why? Because selling a home comes with closing costs, commissions, and possibly capital gains taxes. If you move too soon, you may not have built enough equity to make it financially worthwhile. Ask yourself: Are you planning to stay in the same city or job? Do you feel ready to settle down a bit? Sign #4: You’re Ready for the Responsibilities of Ownership Homeownership isn’t just about finances—it’s a lifestyle shift. Are you ready to: Maintain a yard Handle repairs Budget for appliances or home upgrades These are everyday realities renters don’t usually deal with. If you’re ready to take that on, it’s a strong sign you’re ready to buy. Need a reality check? Watch The Real Cost of Homeownership for a behind-the-scenes look. Sign #5: You’ve Budgeted for the Full Cost of Homeownership It’s easy to focus just on your monthly mortgage payment—but that’s only part of the picture. You also need to budget for: Property taxes Homeowners insurance Maintenance and repairs HOA fees (if applicable) If you’ve run the numbers and still feel comfortable, you’re probably in good shape. Red Flag: You’re Buying Out of FOMO If your motivation to buy a house is: Everyone else is doing it You’re afraid of being priced out You feel pressured by social media or family Take a step back. Fear of Missing Out (FOMO) is not a solid reason to buy a home. Your decision should be based on your goals, your finances, and your lifestyle—not the market hype. Not Sure If You’re Ready? We’ve Got You Covered Download our free Homebuyer Readiness Checklist to see where you stand Check out our Blueprint to Homeownership course for a step-by-step guide through the buying process Bottom Line Buying a house isn’t something to rush—but with the right preparation, it can be one of the most rewarding decisions you ever make. If you feel financially stable, ready for long-term commitment, and confident in your lifestyle plans—you may be ready to take the next step. Have questions? Reach out here Book a 15 Mins Call and we’ll walk you through it. Want more clear, honest mortgage advice? Subscribe to Loan With Jen on YouTube
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Did you know that buying a home doesn’t just build equity… it actually lowers your tax bill every single year ? Whether you're a first-time homebuyer or looking to grow your investment portfolio, real estate offers powerful tax advantages that most people don’t even realize exist. I even have a legal strategy that helps real estate investors defer taxes on hundreds of thousands of dollars in profit. Why Does Real Estate Have So Many Tax Perks? Simple: The government wants you to buy real estate. Homeownership and property investment fuel the economy, so the IRS offers major tax incentives just for owning property. But many people miss out on these benefits—either because they are unaware or didn’t plan ahead with a qualified professional. Tax Benefits for Homeowners (Primary Residence) If you’re buying a home to live in , here are the top 3 tax perks you need to know: 1. Mortgage Interest Deduction You can deduct the interest portion of your mortgage —which is a huge portion of your payment in the early years. For most people, the deduction applies to loan amounts up to $750,000 (if married filing jointly). Fo example, if your loan is $400,000 at 6% interest, you’re paying ~$24,000 in interest your first year—most of which may be deductible. 2. Property Tax Deduction You can deduct state and local property taxes , up to $10,000 per year (or $5,000 if married filing separately). While not as generous as it once was, it’s still a meaningful deduction, especially in higher-tax areas like Texas . For Texas-specific property tax resources, check out the Texas Comptroller’s Property Tax Help page. https://comptroller.texas.gov/taxes/property-tax/ 3. Capital Gains Exclusion When you sell your primary home, you may be able to exclude up to $250,000 of the profit (or $500,000 if you are married) from capital gains tax. The catch: You must have lived in the home for at least 2 of the last 5 years. That means if your home appreciated $400,000 and you're married—you could pay zero tax on that gain! Watch: How to Avoid Capital Gains Tax on Your Home Sale Tax Benefits for Real Estate Investors This is where the real tax magic happens. As an investor, you’re not just earning income—you’re tapping into one of the most tax-advantaged asset classes in the country. Here are five big tax breaks available to real estate investors: 1. Depreciation Even if your rental property is appreciating in value, the IRS lets you “pretend” it's losing value for tax purposes—this is called depreciation . A $275,000 rental property (excluding land) can generate $10,000/year in depreciation —offsetting your rental income on paper and lowering your taxable income.
If you're planning to buy a home in the U.S. and you're currently on a work visa or other visa status , this news directly impacts you. As of March 26 , the FHA (Federal Housing Administration) announced it will no longer accept applications from visa holders , regardless of the type of visa. This change may come as a shock, especially if you’re in the middle of the homebuying process or have already been pre-approved. Let’s break down what this means—and what options are still available to you.