If you’ve ever been in a position where you are buying something with someone and not sure if you just co-signed for them or if you are the actually have ownership of the item. I know I can’t be the only one that’s had that question before, so I thought this was some good info to share.
Going back to a previous post "What are these banks looking at, I keep getting denied" we talked about what financial institutions and underwriters look for on your credit report. I wanted to save this information specifically for this post because it’s helpful info for the couple that is not yet married, the parent trying to help out their kids, or even the good friend/family member that wants to give a lending hand....literally.
This is something that the change is so subtle it truly is only one thing that separates the two, so to everyone that is a considering co-signing in the future pay attention.
Before signing co-signer documents ask about co-borrowing. On the credit report it is reported the same your responsibility to the debt doesn’t change, meaning if the person you help sign for defaults you are still responsible for the debt as if it were your own. Also the debt counts against your debt to income ratio though someone else maybe paying for it. The difference when it comes to co-borrowing and why I encourage those to look at co-borrowing is equitable interest`. When you are joint on an account think of it as 50/50 partnership.
Whatever that account is whether its a credit card, automobile, and especially a property you have deciding power legally as to how that account is handled. If you are just a co-signer you are subject to the buyers interest.
Let me give you an example of how that can protect you...
In a sale of the property, you being on the loan as a joint borrower means that you are subject to some of the decisions when it comes to the sale of that property and potentially some of the profits as well. In addition, should one party want to short sale or even foreclose you have a right as well to move forward or don’t.
Same goes for any other account. This can protect you from bad business decisions of another party and help you mitigate some losses that might accrue.
Before you co-sign talk to the lender about co-borrowing and see if it’s mutually beneficial.
Thanks for reading, hope this helps someone