MortgagesUndressed

Maybe, former friends if not careful.

First of all, most loan programs won’t let a person with bad credit use a co-signer with good credit to overcome the problem. A file with two borrowers will be underwritten with the lowest borrowers’ credit as the guide post. This is usually the case, even with the spouse having poor credit. The theory here is the lower credits habits will overpower that of the higher credit.

Co-signing can help in qualifying. FHA loans don’t require the co-signer to occupy the home, a unique benefit of FHA. Note - many lenders have dropped FHA, Washington Mutual being the most significant. FHA has become a burden to the lenders, not worth the hassle.

Co- signing by two people occupying the property is acceptable in almost all loan programs.

This however opens the pandora’s box for problems. I recommend you not do this. It is an invitation for future credit problems, legal problems, and friendship problems. You have no control of the future credit management behavior of the co-borrower. They may just run out on your joint obligation. This practice is most common in those under age 30, and this age group is most likely to be over burdened with debt.

Know this, there is a good chance that if you co-sign for another you may be totally obligated for a mortgage where there is a dispute or question as to your rights to own the property if you have to pay the entire obligation just to maintain your good credit.

Also note, I have seen many cases where the co-signer is unaware their credit is being damaged. Both signers credit is affected by late payments. It is common behavior for the person not making the payments to not tell anyone they are having problems.

Larry Cragun