It can be difficult to qualify for a mortgage by yourself. Does it make sense to cosign a mortgage with your partner? Here are a few things to consider.
When You Cosign a Loan with a Partner, it’s a Business Agreement
The first thing to consider is that cosigning a mortgage is basically a business agreement. You’re signing a contract that says both parties are responsible for making sure the monthly payment is fully paid and on time every single month.
No big deal, right? But it can be, because of the old adage “you shouldn’t mix business with family.” The problem is that if you aren’t able to make the payment, now your partner is responsible for it. That can cause some strain on the relationship, especially if it becomes a recurring event.
That said, let’s go into a few specific factors that should be weighed in your decision.
How Long Have You Been Together?
The first thing to consider is how long you’ve been with your partner.
Are you married, having been together for almost a decade or two? Or are you on the other side of the spectrum and have just been dating for a few months?
This is important, because it shows the amount of relationship history and commitment you have to each other. If you’re a fairly new couple, you’re still building that relationship and learning about each other. You probably don’t co-own anything right now – what’s yours is yours, and what’s your partner’s is your partner’s. Going from owning nothing together to a home is a huge jump.
But if you’ve been married for a long time, your possessions are (probably) already jointly owned. It makes more sense for you to buy the house together.
What Can You Afford on Your Own?
Let’s say you’re in the camp of still dating your partner and you haven’t been together for a long time. You’re leaning towards buying a home by yourself, but don’t have the income, assets and credit to get the type of home you’ve been looking at.
In that case, maybe it makes sense to look at other options. For example, could you buy a less expensive home in the suburbs instead of the city? Or could you scale down, buying a townhome instead of a detached single family home?
There may be things you can trade off to find a home within your budget. No, it doesn’t get you into your dream home. But it does let you buy the home by yourself without risking stress to your relationship.
What if Your Partner Asks You to Cosign Their Loan?
The last point was oriented towards if you’re the main person trying to buy a home. But what if it’s reversed? Maybe you are content staying where you are, but your partner is asking you to cosign the mortgage on the home they want to buy.
Unless you’re both in a long-term relationship with that person and see them as being very responsible with their money, we recommend you avoid co-signing. If you sign on the dotted line, you’re opening up a door to potentially hurt both your relationship and your wallet.
Should you cosign a mortgage with your partner? Every case is different, but in general we only recommend it if you’re married to the person since that shows long-term commitment. For any other questions on the home buying process, give us a call at 949-392-6400. We look forward to helping any way we can.