With everything that goes into buying a house, you’ll probably have a lot of questions! One of which might be deciding if you need a co-borrower or not. Understanding what a co-borrower actually is will help with a big decision like that. Below we’ll explain what a co-borrower is and the benefits of having one!
So, what is a co-borrower? A co-borrower is a person who shares liability for repaying a loan with another person. Their income and credit history are also used to qualify for the loan. Their name will appear on all loan documents along with the property’s title.
Now that you have a better sense of what a co-borrower is, what are the benefits of having one? A co-borrower may be used for a couple of different reasons. They can be used for married borrowers or to help an individual obtain a loan that they initially would not qualify for without someone else on the loan. Having a co-borrower can reassure the lender that multiple sources of income can go toward repayment. Applicants with co-borrowers represent less risk to the lender so they are more likely to receive larger loan amounts and could also qualify for lower interest rates as well.
For example, a father could serve as a co-borrower for his son's home loan. By applying with a co-borrower, the son may qualify for the loan with his father’s higher credit score and may receive a lower interest rate as well.
If you’re in need of a co-borrower, be sure it’s someone you trust and can rely on. Communicate thoroughly with them so they feel comfortable having their personal information pulled and adding their name and information to the loan. If you have been asked to be one, always consider who you would be co-borrowing with and the risks that come with it!