A friend of mine asked me to co-sign with her on a small house. (loans, real estate)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
This is a friend of 40 years. She has had a hard time in the past decade. She has been paying through the nose for a large house that needs loads of work. She has a down payment. She's been in her current home for a year. Her credit is 600.
She will be paying less for the smaller house.
I know the risks. What I want to know is - can I take my name off the mortgage at any time? After a few years? My guess is she will have to refinance or sell. The payments she makes on her current house do not count towards her credit.
She has a decent job. She's been on time with her payments since living in this house. It's too much for her to care for.
No, no, no. The pitfalls are the problem and are obvious (sickness for either of you, loss of income for either of you, major home repairs, etc.). I wouldn't do it for anyone, not even my own children. I'd let them live with me and save an adequate down payment and/or raise their credit score before I'd cosign a mortgage for someone who couldn't qualify on their own. As far as getting off the mortgage, that would be specified in the mortgage contract in the form of a release contingent upon a certain period of on time payments (eg. 2 years). But you have no way of knowing what two years will bring.
The pitfall is that if she defaults for any reason: illness/injury is one; it will affect you and your credit rating unless you pick up the missed payments but you have no interest in the house. Also, if she dies, the home goes to her heirs but the mortgage is still in your name - and your credit.
Rather than co-sign, it would make more sense to me to have you both on the deed and mortgage with an agreement - in writing - that you will quitclaim your interest in the home to her when she can refinance on her own. For that you need to see a lawyer.
My father said, never ever co-sign for anyone. Other than that, I don’t know the answers to your questions. As catastrophic a risk as you are considering, I would not be asking dummies on an internet bulletin board. I would be consulting a financial expert. Title expert, lawyer, financial planner. Somebody.
Why do you need to co-sign for her? Is it an income issue? There are lenders who will accept a 600 credit score on an FHA loan. I think your friend needs to explore her options for purchasing on her own. I wouldn't ever co-sign for a friend.
If you have enough income that you would qualify for loans on your house plus hers you could consider buying both then renting the second one to her while she repairs her credit. Then sell to her or keep it or whatever. That way you have a good tenant and she has a good landlord.
This is a friend of 40 years. She has had a hard time in the past decade. She has been paying through the nose for a large house that needs loads of work. She has a down payment. She's been in her current home for a year. Her credit is 600.
She will be paying less for the smaller house.
I know the risks. What I want to know is - can I take my name off the mortgage at any time? After a few years? My guess is she will have to refinance or sell. The payments she makes on her current house do not count towards her credit.
She has a decent job. She's been on time with her payments since living in this house. It's too much for her to care for.
Other than the obvious - what are the pitfalls?
I'd have a chat with a real estate attorney, if I really wanted to help this friend.
Mortgages used to be private affairs between 2 individuals, and it may still be in your state. In that case you buy the house and carry the mortgage until it is paid off. If she defaults or dies, you get the house just like a bank would.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
