Today we’ll discuss the key differences between a mortgage co-borrower and a mortgage co-signer.
While the two phrases sound pretty similar, and are sometimes used interchangeably, there are important distinctions that you should be aware of it considering either.
In either case, the presence of an additional borrower or co-signer is likely there to help you more easily qualify for a home loan.
Instead of relying on your income, assets, and credit alone, you can enlist help from your spouse or a family member.
This may allow you to qualify for a larger loan amount, snag a lower interest rate, or even win a bidding war via a stronger offer.
What Is a Mortgage Co-Borrower?
A mortgage co-borrower is an individual who applies for a home loan alongside another borrower.
Typically, this would be a spouse that will also be living in the subject property. To that end, they share financial responsibility and ownership, and are both listed on title.
For example, a married couple may decide to purchase a home. They apply together as co-borrowers.
Doing so allows them to pool together their income, assets, and credit history. Ideally, it makes them collectively stronger in the eyes of the lender and the home seller.
This could mean the difference between an approved or rejected loa application, and even a winning vs. losing bid on a property.
Just imagine a home seller who is deciding between two competing bids with their real estate agent.
Do they go with the borrower just scraping by financially, or the married couple with two good jobs, two steady incomes, solid pooled assets, deep credit history, etc.
Speaking of that income, two incomes could allow you afford more home.
What Is a Mortgage Co-Signer?
A mortgage co-signer is an individual who acts as a guarantor on a home loan and takes responsibility for paying it back should the borrower fail to do so.
In that sense, the co-signer acts as a sort of safety net, and not an active participant.
This means they don’t make monthly payments, nor do they reside in the subject property.
Perhaps more importantly, they do not have ownership interest in the property. However, they share liability along with the borrower(s).
To be blunt, they get all the potential bad without any of the good, i.e. ownership.
But the whole point of a co-signer is to help…