Before You Co-Sign That Mortgage
Helping someone reach a major milestone can create financial ties that last longer than expected. Make sure co-signers understand what that could mean.
NEW YORK – A helping hand every now and again is vital as people pursue a wide range of goals. Financial assistance can be particularly helpful in modern life thanks to the significant increase in traditionally high-priced items like vehicles and homes.
Home prices have soared over the last half decade, and the analysts at Cotality anticipate an average home price increase of 3.9% between July 2025 and July 2026.
As the cost of homes rise, older individuals who are comfortable financially may be asked by their grown children or adult relatives to co-sign loans. While co-signing a loan is a selfless gesture, it's important that adults recognize the stakes of such decisions.
What does co-signing mean? A person who co-signs a loan is agreeing to be responsible for the primary borrower's debt should that individual prove incapable of repaying the loan on their own.
The Federal Trade Commission (FTC) notes that co-signers are responsible for making payments the primary borrower misses. A co-signer also is responsible for the balance if the loan defaults because the primary borrower stops making payments.
Which loans tend to require a co-signer? The FTC notes just about any type of loan can be co-signed. But co-signers tend to be necessary when younger borrowers with limited or nonexistent credit histories attempt to borrow money.
Creditors who issue student loans, auto loans and mortgage loans may require young borrowers or applicants with checkered credit histories to find a co-signer before they will loan such individuals any money. Costs of big-ticket items are higher than ever, which underscores the gravity of the decision to co-sign a loan.
What can I do to safeguard myself as a co-signer? The FTC urges prospective co-signers to read a document known as the "Notice to Cosigner," which lenders must provide to anyone co-signing a loan. This simple notice spells out exactly what it means to co-sign a loan and urges co-signers to be certain they can afford to pay the loan if the primary borrower defaults.
Vetting the borrower is another vital step for co-signers. If asked to co-sign a loan, even if the request is made by a relative, it's best to ask for documentation detailing the prospective borrower's finances.
An income statement, bank statements, an up-to-date credit report, and a list of existing financial obligations can give potential co-signers an idea of how capable the prospective borrower will be in regard to making each monthly payment on time and doing so without jeopardizing their co-signer's finances.
Does co-signing affect my credit? The FTC notes creditors can report the loan to credit bureaus as the co-signer's debt. Should that occur and the borrower misses payments, that could be a black mark on co-signer's financial reputation.
© Copyright © 2026 Hometown Multi Media Partners, LLC., All rights reserved.