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Co-Borrower vs. Co-Signer: What's the Difference?

  

  

  

  

  

  

  

  

  

Sometimes, buying a home requires the help of another person. It could be a spouse, parent, or significant other. If you plan on purchasing a home and including another party, it's important to know what to look for in a "purchasing partner". Let's look at the difference between a Co-Borrower, and a Co-Signer:

What is a Co-Borrower?
A co-borrower is a co-owner of the property. Their name will be on the title of the home, right alongside yours. Beyond having their name on the title, a co-borrower's assets, credit history, employment history, and debt are assessed right along with yours in the loan process. Using a co-borrower is helpful to you if you're trying to qualify for a larger loan or a better interest rate. From the perspective of the co-borrower, the advantage is that they would co-own the property.

What is a Co-Signer?
A co-signer applies for the home loan right along with you. However, they are not on the title of the home. The co-signers name is only on the loan, meaning that while they are financially responsible for paying back the mortgage, they do not have ownership of the property. The reasons for having a co-signer vary but are always related to home qualifying. If you need to boost up your debt-to-income ratio, or otherwise prove stellar financial history, a co-signer can do that for you.

Choosing a Trustworthy Co-Borrower or Co-Signer
Right up front, you will need to determine who is making the monthly payments and how much is contributed to the monthly payments. That's why is critical that you choose a person that you trust and is financially responsible.

Remember that is for some unforeseen reason your co-borrower or co-cosigner cannot make their contribution, you are still responsible for the loan.

If you are on the other side of the fence, meaning that you are the co-borrower or the co-signer, and the other party does not make the payments, you are still responsible. However, you have an advantage if you are the co-borrower in this situation. If the other party stops making payments, as co-owner, you can take possession of the property.

This is not the case as a co-signer. Remember that a co-signer is not on the title of the property and cannot take ownership of it.

Applying for a Home Loan with a Co-Borrower or Co-Signer
Getting a home loan with a partner is the same as if applying solo - each party will need to provide proof of income, assets and bank statements, proof of identity, and other documents.

Starting the application process is also just as easy and can be done right here, on our website. Just fill out the online form, and you'll have taken the first step toward home ownership!

Have more questions? Wondering which loan is right for you? Contact us today and get personalized assistance from a mortgage professional.