How does co-signing for a loan work?
When someone with exceptional credit co-signs for you for a home loan, do you get their credit and the bank doesn’t look at yours? I’m looking at buying a house and my parents will co-sign for me and was wondering how the whole process works.
You will get a good rate if they have really good credit. If you default for whatever reason, they will be on the hook. Late payments by you will show on their credit. You need to be really responsible on this, or you can expect family problems.
Your credit is still looked at. A co-signer is offering to pay the loan if you do not. If your parents are saying that they will co-sign for you, that means they will be applying for the loan with you. If you do not make your monthly payments, you will take your credit and their credit and flush it down the crapper. However, if you make your payments on time, it improves your credit as well as their credit.
Hope this helps.
If you have parents that will do this for you, consider yourself lucky and don’t misuse it! Your parents will be on the hook if you fail to make the payments.
One thing you may want to do if you are real with your folks, escrow your property taxes and homeowners insurance into the mortgage payment. That way the investment is totally covered!
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I was a victim of Identity theft and had to rebuild and start over after bankruptcy! This is a great opportunity for you. Use it well! Both your credit and your parents will be checked. This would be a ggod time to get a free credit report on yourself. There is a link to free credit report com in the “how credit scoring works” section if you want one from there.
You might as well see what your lenders are looking at and if you need to correct errors get a credit monitoring service like Equifax. In my experience they have the least amount of errors and the least cost for all 3 in 1 reports!
It means the bank has already looked at your credit and determined you are unable to pay. So, they want somebody else to cosign and be responsible for the debt if you can not make the payments.
The whole process works like this…imagine your parents having a controlling interest in your life for the duration of your mortgage. Sound like fun?