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Co-borrower vs. cosigner: Exploring the differences

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    Taking out a mortgage and buying a home often isn’t something you can do entirely on your own. If you’re looking to buy a home and need some support, a co-borrower or cosigner may be able to help. With the help of a loan officer, you’ll be able to find which one is fit for your financial and mortgage needs.

    Whether you’re looking for someone to share financial responsibilities with, a boost in your mortgage candidacy or someone to fall back on in the event of financial hardship, a co-borrower or cosigner can help.

    Keep in mind: If you decide a co-borrower or cosigner is of interest to you, you’ll want to align with the other party and prepare all necessary documents prior to your mortgage application journey. 

    What is a co-borrower?

    A co-borrower is someone who joins you, the primary borrower, in the mortgage application process. Their credentials are used, in conjunction with yours, to qualify for a home loan. This means they share the financial responsibility of loan repayment and have partial ownership of the asset. For our purposes, the asset will be your home. This means your co-borrowers' name will appear next to yours on the title.

    A co-borrower can be a significant other, especially if you’re buying and sharing the home together. It can also be a family member or a friend who’s helping you qualify for and pay back a loan, especially if you’re a first-time homebuyer. 

    What is a cosigner?

    When it comes to mortgages, a cosigner functions a bit differently from a co-borrower. A cosigner agrees to take on financial responsibility if the borrower defaults on their payments, but they don’t have any legal claim toward the home. Due to their financial disposition, a cosigner helps the borrower qualify for a loan they otherwise wouldn’t have qualified for. Having a cosigner on your application reassures the lender the loan will be paid back if the primary borrower is unfit to do so at any given point in time.

    A cosigner is usually a family member or loved one whose financial health is in — from the lender’s perspective — a more financially desirable state than the borrower, and who lacks a personal stake in the asset. For example, a parent who cosigns their child’s first home. Their name is not found on the title but if their child stops paying, the lender turns to them for repayment.

    What is the difference between a co-borrower and cosigner?

    A co-borrower’s name is seen on both the title and the loan, meaning they have a right to the property and share the responsibility of loan payback with the primary borrower on the mortgage. A cosigner does not have their name on the title or any right to the property, but is financially liable if the primary signer defaults, or is unable to pay the loan. 

    Who is a co-borrower best for?

    A co-borrower is best for a friend, family member or loved one who may need help qualifying for a loan but is also comfortable with, or even looking to, share financial responsibilities in addition to ownership of the property.

    For example, a husband and wife who agree to pay back their mortgage together and want both of their names on the title. It can also apply to two friends purchasing and sharing a vacation home.

    Who is a cosigner best for?

    A cosigner is best for someone who needs help qualifying for a mortgage. They aren’t interested in sharing the property or even the financial responsibility of paying off the loan, they simply need proof that someone will back them if they run into any problems. In this case, the cosigner serves as a guarantor for the lender and doesn’t become involved, beyond cosigning the mortgage, unless the borrower defaults. The cosigner should be privy to and comfortable with their responsibilities in this binding agreement.

    Now that you understand the difference between a co-borrower and cosigner, you can move forward knowing there are many ways to feel emotionally and financially supported on your mortgage journey. If you’d like more information on when and how to prepare a co-borrower or cosigner, you can speak with one of our loan officers today.

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