Before we delve into the topic of co-signers, it is important to know the meaning of the term. A co-signer is actually defined as an individual other than the borrower who signs a promissory note and thus assumes equal legal responsibility for it. A co-signer is also known as a co-maker.
Now it needs to be mentioned that the extravagant cost of housing has virtually transformed the conventional purchasing patterns in a growing number of cases. There was a time when individuals and families were able to own homes with no trouble, but now purchasing a home is out of the affordability of majority of the Americans. If one takes a closer look at the amount of mean incomes and the average price of a house, it becomes obvious that in majority of the cases the earnings of a solitary wage earner is not enough to purchase the usual home any more. Hence, there are two ways that can somewhat resolve the affordability problem - purchase a home with another person or to get some one to co-sign a mortgage.
Buying a property jointly is a very common issue and most real estate purchase forms have provisions for this. In fact, on an average all the forms have a space for filling in the names of the persons who will be holding the title and the space may be filled by the joint buyers as 'Tom Brown and Jane Brown, as tenants by the entirety' denoting that the two persons are married. They may also fill the form of title in any other way that they may deem proper. However, in comparison to joint ownership of a property, the issue of co-signers is complicated, as both the people who are always not co-owners of the property, but are responsible for the total reimbursement of the mortgage. The agreements mainly deal with the issue of title, but seldom offer for the use of co-signers.
It is possible that a buyer has just got an employment or is just out of school and hence, yet to create a credit record. In such a situation, a co-signer comes to the help of the buyer by being liable for the refund of the mortgage loan and permitting the utilization of his or her credit record with a view to enable the buyer to qualify for the funds. In fact, even most of the lenders prefer co-signers, especially people having wide-ranging resources, as this provides them with added safeguards in the case of any default by the purchaser.
It is important for the co-signers to be conscious of the fact that their partaking in a real estate deal gives rise to an obvious responsibility even if they are not the co-owners of the property. For instance, if John Green co-signs a loan along with his son, Bill, Jr., the senior Green will be completely liable for the total refund of the loan. The co-signers should also be aware of the fact that the responsibility may not only be limited to the commitment to reimburse the loan, but also the costs involved in foreclosure of the property.
While it is important to take the issue of the liabilities of the co-signers seriously, it is also true that all co-signers do not meet the same risks. For instance, in a real estate transaction with 20 per cent down payment and increasing prices of homes, the perils of a co-signer would mostly be restricted to his or her original investment - any money that they may have paid for the down payment and the agreement. On the other hand, if the price of real estate is going down, the buyer want to sell the home, he or she may not get a price sufficient enough to repay the total loan. In such a situation, the co-signer will be responsible to fill in the amount falling short to refund the entire loan.
Looking at things from the seller's viewpoint, every seller should be cautious when an offer to purchase the property is dependent on the participation of people who are yet to agree to function as co-signers in the real estate transaction. In this case there is always a risk that the potential co-signers would not desire to help a buyer or offer any credit information to the lender. Unless and until these procedures are completed the transaction cannot be finalized. In fact, the reluctance of the prospective co-signers to help the buyer will eventually finish the deal.
In fact, the sellers should never view an agreement that involves the participation of co-signers as a negative aspect of any real estate deal. In fact, it is probable that the lone person in the entire world who would wish for purchasing the seller's property is someone not having sufficient funds or credit to make the sale a reality. In this case, it is only possible to change this person from a renter to an owner with the assistance of a co-signer.
