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Beware Of Unintended Consequences of Co-signing For a First-Time Homebuyer

Jan 04

filed under: Real Estate

Sure we all have family members that we love and want to help out if we are in a position to do so. What a great time to buy for a first-time home buyer, but it may not be so easy for them to get financing. We all know in these tough economic times lenders are tough as nails and are more than leery of  first-time home buyers. This is where you “the Calvary” come in.   If you find yourself in the situation where you are asked or you possibly volunteer (personally I think you’re crazy) to co-sign on a mortgage for a first time home buyer, you should be aware of the possible unintended consequences of being such an nice person. Here goes . . .

Should this special family member you co-signed for not make their mortgage payment, you will be required to do so. If they have a job loss, become disabled and can no longer work, that mortgage payment will be your responsibility. If the payments are not made, a collection agency can come after you, and believe me that’s not a lot of fun, or worse yet the lender can sue you. If the property is foreclosed it will show up on your credit report. Any late payments will show up as a delinquency on your credit report. Depending on the amount of the debt it could prevent you from qualifying for a home loan you may need at some time in the future.

Yes there are exceptions. Perhaps you are in a financial position where it will not be a problem to handle the mortgage obligation if it becomes necessary. That said for those not that prosperous, it commands some considerable thought and professional advice before co-signing the note. My advice, if that’s not the case, take off your nice guy hat and politely decline.

Written by Howard Harris