A mortgage co-signer is anyone willing to use their financial profile to help a borrower qualify for a mortgage and/or access a lower interest rate. By co-signing on a mortgage, you’re agreeing to repay the loan if the primary borrower is unable, which is why it’s important for co-signers to have good credit, a steady income and low debts.
Whether you are considering asking a friend or family member to cosign for you or you’re the one considering co-signing for someone else, here’s what you need to know.
Both co-signers and co-borrowers are financially responsible for repaying the loan. What makes a co-signer different from a co-borrower is that they are only required to make payments on the loan if the borrower defaults. Co-signers also do not have any rights to the property securing the loan, meaning they don’t have ownership like a co-borrower.
Most co-signers are non-occupying co-borrowers. Non-occupying co-borrowers do not live in the home with the primary borrower. Conversely, an occupying co-borrower is someone who will live in the home. The most common example is two spouses who buy a home together.
When a primary borrower and a co-signer apply for a mortgage together, the process will involve verifying both applicant’s income, credit, debts and assets meet the lender’s requirements. This typically includes pulling both credit reports and vetting both employment histories.
In addition to meeting a lender’s criteria, the type of loan can also impact the co-signing requirements. For example, FHA and conventional loans both allow non-occupying co-borrowers, while VA or USDA loans only allow co-signers who will occupy the home.
After you’ve both qualified and it’s time to finalize the loan, you’ll both sign the note, in which you agree to have liability for paying the mortgage. Once the sale has gone through, you’ll both be responsible for making sure mortgage payments are made on time, until the loan is paid off. If the primary borrower is late on a mortgage payment, it will reflect poorly on both people’s credit.
No, a co-signer is not an owner. Co-signers and co-borrowers must both be listed on the mortgage, but co-signers are not on the title to the property. Only anyone included on the title is considered an owner.
A mortgage co-signer may help you meet a lender’s debt-to-income requirements when you’re trying to buy a house. Consider this example that compares buying alone against buying with a co-signer who has less debt. For reference, most conventional loans require a DTI of no more than 43%, so in the example below, you can see how using a co-signer helps this borrower qualify. Check your current ratio of debt-to-income to see if you’d benefit from adding a co-signer to your mortgage.
| Buying alone | Buying with a co-signer | |
|---|---|---|
| Annual income | $41,791 | $85,353 |
| Monthly debt | $1,233 | $1,833 |
| Debt-to-income ratio | 50% | 36% |
| House affordability | $64,721 | $85,353 |
| Monthly mortgage payment | $504 | $658 |
*This example uses the US Census median income for a non-family household in 2021. The amount of monthly debt is based on the national average and assumes the co-signer has a lower qualifying debt of $600. House affordability assumes the buyer is putting down $9,000 on the home purchase with a 5.97% interest rate on a 30-year conventional loan that includes PMI, a 1.2% property tax and a $945 a year home insurance cost.
Anyone who does not have a financial interest in the sale of the property can co-sign a mortgage. Your co-signer can’t be the seller, builder, real estate agent, appraiser or attorney on the home.
Some loan programs may limit who can cosign on the mortgage and how they must be included on the title. Here are some of the rules:
Conventional: Any relative, significant other, ex-spouse or friend can be a co-signer on your loan, whether they plan on occupying the home or not, so long as they do not have an interest in the sale of the home.
FHA: The Federal Housing Authority requires all co-signers to be a relative by blood or marriage. Spouses will need to provide proof of their relationship. In some cases, close friends may be considered if they can provide a documented long history of friendship.
VA: The Department of Veterans Affairs requires that co-signers be a spouse or another VA-qualified borrower. That means a friend or family member who also is a qualifying service member or military veteran can be a co-borrower. All co-borrowers must live in the home.
USDA: The United States Department of Agriculture requires that co-borrowers live in the home.
Regardless of loan you choose, all mortgage co-signers must meet the following requirements:
Different loan types have different credit score requirements. When applying for a mortgage with a co-signer, each borrower must meet the minimum credit score requirements based on the type of loan and the lender’s criteria. Lenders typically use the lowest credit score among all the borrowers to determine the rate and loan terms. If your co-signer has an excellent credit score of 800 and you have a fair credit score of 640, your credit score would be the one the lender would work with.
| Minimum credit score for a mortgage with a co-signer | |
|---|---|
| Conventional | 620-660 |
| FHA | 500-580 |
| VA | 580-620 |
| USDA | 580-620 |
| Jumbo | 680-700 |
The primary borrower and the co-signer must have a combined debt-to-income ratio that meets the loan program and individual lender’s requirements. Here are the DTI limits by loan program:
| Minimum DTI ratios for a mortgage with a co-signer | |
|---|---|
| Conventional | The blended DTI ratio of the borrower and co-signer must be less than 50%. |
| FHA | The blended DTI can’t exceed 55%, and a 3.5% minimum down payment is required. |
| VA | A DTI ratio of up to 70% is allowed. |
| USDA | The blended DTI must be below 41%. |
| Jumbo | DTI ratios can be up to 43% for a primary residence or up to 40% for a second home. |
The co-signer must provide all the same documents that the primary borrower will need when applying for the mortgage. This typically includes:
The biggest risk of being a co-signer on a mortgage is that if the primary borrower makes late payments or worse, defaults on the loan, your credit report will be negatively impacted. Delinquent payments will show up on your credit report and can lower your credit score, making it hard to get a good interest rate down the road. If the home goes into foreclosure, you may not be able to get a mortgage loan as easily in the future.
Another consideration is that already having a mortgage may affect your ability to get approved for other types of loans, like personal loans, auto loans, business loans or student loans. This is because the mortgage you already have will factor into the amount of debt you have to pay back. Sometimes, a co-signed mortgage can be excluded from your loan qualification if you can prove to the new lender that your co-borrower has been making the full mortgage payments on time for at least 12 months.
Finally, a less often considered drawback is that sharing financial responsibilities with friends and family members can strain relationships, especially if things don’t go as planned. Remember, buying a home can be up to a 30-year commitment and removing yourself as a co-signer can be difficult. It often requires a refinance and the other party to be able to qualify for the mortgage on their own.
If you’d like to explore alternatives to having a co-signer, there are a few different steps you can take.
Government-backed loan programs from the Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) are easier to qualify for. For example, FHA loans allow a credit score as low as 500 if you’re able to make a 10% down payment. Borrowers with a 580 credit score or higher can make a down payment of just 3.5%. And, your DTI can be as high as 55%. VA loans accept credit scores between 580 and 620 and allow a DTI of as high as 70%.
Some states and non-profit organizations have housing assistance programs that can help you qualify for a mortgage. There are often specific programs designed to help first-time home buyers and low income buyers.
These programs allow blended DTI-ratios for co-signers, making qualification easier. They will also allow you to count the income of people who won’t be on the loan, but who verify they’ll live in the home for at least 12 months, like a roommate.
Lenders set some of their own qualification criteria, so even if you don’t qualify with one lender, you may have other options. Shop around and compare multiple lenders. You can start the pre-qualification process with us at Zillow Home Loans.
You’ll need less income to pay for a cheaper property, so lowering your home buying budget can make it more likely you’ll qualify for a mortgage loan. Use Zillow’s affordability calculator to see what priced home you can reasonably afford to buy.
Some loan programs allow you to count tenant income in your qualification. For example, with an FHA multi-family loan, you can buy a two- to four-unit property with just 3.5% down, and the other units’ rent can help you qualify. You just have to live in one of the units for at least a year.
Yes, as long as you meet the loan program and lender qualifications for income, credit and debt, you can co-sign on another mortgage.
It’s common for first-time home buyers to have a parent or other family member co-sign on a mortgage with them. That’s because first-time home buyers typically have a more limited credit history, lower income and a smaller down payment, since they don’t have equity from a previous property.
Consider this statistic from a 2022 Zillow Survey: 47% of first-time home buyers were denied financing at least once before ultimately getting approved. 1 For many first-timers, adding a co-signer can improve their chances of going from home buyer to homeowner.
Younger mortgage buyers are significantly more likely to report being denied financing at least once, compared with their older counterparts. For example, 27% of buyers under 30 years old reported at least one mortgage denial, whereas only 9% buyers in their fifties did.
It depends on the lender, but most lenders won’t allow more than four people on a single mortgage loan.
Co-signers can be removed from a loan, but it’s not easy. The primary borrower will need to refinance the loan, which can be costly and time consuming. They must also be able to qualify for the loan without a co-signer, which means their financial situation must have improved since the original purchase. The only other option is to sell the property.
1 Self-reported mortgage denials appear to skew much higher than denials in Home Mortgage Disclosure Act (HMDA) data (34% of successful mortgage buyers self-reporting in 2021 vs. 9% of all applicants in the most recent HMDA data from 2021). HMDA data includes all mortgage applicants — not just successful mortgage buyers. It is also possible that survey respondents overreport cases where hurdles like providing relevant documents or poor communication/customer service from a lender caused financing to fall through — without receiving a formal denial.
