Understanding Co-Borrowers vs. Cosigners When Applying for a Mortgage

Buying a home is a big step, and one of the biggest investments you’ll make. To make this happen, you’ll likely need a mortgage loan from Blue Spot Home Loans.

Not everyone who submits a home loan application gets approved, though. Getting a mortgage requires an established credit history and enough income. And depending on the information collected as part of your loan file, getting approved for a mortgage may also require a cosigner or a co-borrower.

Some people use these terms interchangeably. But when it comes to getting a mortgage loan, there are distinct differences between the two. Here’s what you need to know about cosigners and co-borrowers when applying for a mortgage to determine which one is right for you.

What is a Cosigner When Applying for a Mortgage Loan?

Many people are familiar with how cosigning works, especially young adults getting credit for the first time. You need credit to build credit, so it’s not uncommon to get rejected when applying for first-time credit.

You might have a parent cosign an auto loan or student loan to help establish your credit history. And perhaps you needed a cosigner to get your first apartment or credit card.

But cosigners don’t only help in these capacities. Cosigners are also beneficial when applying for a mortgage, particularly if you have a short or limited credit history, and you’re unable to qualify for a loan (on your own) at this time.

A cosigner is essentially someone who vouches for the loan on your behalf and accepts legal responsibility if you don’t pay. Keep in mind, though, you remain the primary signer on the mortgage. So you’re responsible for making the mortgage payments, and you’ll receive monthly statements.

A cosigner only steps in and assumes responsibility if you default or can’t pay for any reason. Having a cosigner builds a lender’s confidence, and in turn, helps you get approved for the loan.

You can’t, however, use any random person as a cosigner—your lender must approve this person. In addition, your cosigner must have good credit, and the financial ability to step in and make the mortgage payment if need be.

It’s also important to note that while this person cosigns the loan, they don’t have any interest or ownership in the property. So their name doesn’t appear on the mortgage title. Your option to use a co-signer depends on your loan type and other qualifying factors, so talk to a loan expert about your situation.

What is a Co-Borrower When Applying for a Mortgage Loan?

A co-borrower, on the other hand, has more responsibility than a cosigner. A cosigner only guarantees the loan, whereas a co-borrower is fully responsible for the loan and the monthly payment (equally with the other borrower).

A borrower’s and co-borrower’s credit and income are also weighed equally when applying for the mortgage loan. Monthly statements will arrive in both of their names, and both have access to account information.

A co-borrower also has ownership of the property. In most cases, this will be someone who resides in the home, typically a spouse—although co-borrowers can also include parents, children, siblings, or another occupying borrower.

People commonly used as a cosigner also include parents and siblings, but might also include grandparents and other relatives.

Since a co-borrower is fully responsible for the mortgage and payment, one benefit of having a co-borrower when applying for a mortgage is that we’ll use your combined incomes to determine affordability.

This isn’t the case when using a cosigner. Since you’re making the mortgage payment yourself, we use your income alone to determine how much you can afford to spend on a property.

Bottom Line

Getting a mortgage and buying a house can provide a major sense of accomplishment and provides stability. But depending on your circumstances, you might have trouble qualifying for the mortgage on your own. If you have questions about your home financing options, the loan experts at Blue Spot Home Loans can help you find the right mortgage for your circumstances. Give us a call or fill out the contact form today.

Cherry Creek Mortgage Co., Inc. NMLS #3001, dba Blue Spot Home Loans. This material is informational only and not an advertisement to extend credit as defined by TILA/Regulation Z nor an application for credit as defined by RESPA/Regulation X. All applications are subject to underwriting approval and determining applicant’s ability to repay. Not all applicants are eligible for or qualify for all loan products offered. All loan programs, terms and conditions are subject to change without notice. Rates and terms are valid as of the date of printing/distribution.