Q. My credit has always been good, and my brother’s credit stinks. He just got married and they want to buy a house. I’m thinking of co-signing the mortgage. What do I need to consider? — Brother.
A. It’s very kind of you to want to help your brother, but before you do, you need to understand that you’d be taking a pretty hefty risk.
Jeff Rossi, a certified financial planner with Peak Wealth Advisors in Holmdel, N.J., said that since you have good credit, you’ll make it easier for your brother to get a loan at a good rate, and you’ll probably also help him improve his credit. J.
If your brother’s credit is bad, he has obviously had some credit missteps in the past, Rossi said.
Purchasing a home is an exciting milestone in life but qualifying for a mortgage can be challenging especially for first-time homebuyers. If you have poor credit or limited income, you may struggle to get approved for a home loan on your own. In this case, you may consider asking a family member or friend to cosign the mortgage with you. But is having your brother cosign a good idea? Here are some important things to consider before making this major financial decision.
What Is A Mortgage Cosigner?
A cosigner is someone who agrees to legally have to pay back the mortgage loan if the main borrower stops making payments. When you apply for the loan, the cosigner’s assets, income, credit score, and amount of debt are all looked at. This can help make up for problems in the main borrower’s credit history.
If, say, your credit score is too low to qualify on your own, having your brother cosign with good credit could help you get approved and get a lower interest rate. Even though you pay each month, he is still responsible for the debt.
Potential Benefits Of A Family Member As Cosigner
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Better chances of getting approved—Your brother’s finances and credit history can help make up for problems like your low income or past credit mistakes.
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Lower interest rate – Good credit means you may qualify for a lower mortgage rate, saving thousands over the loan’s term.
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Building credit – Making on-time payments can help improve your credit score over time.
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Family goal: Owning a home is a big deal, and your brother might be happy to help you get there.
Risks To Consider Before Asking Your Brother To Cosign
While there are benefits, cosigning a mortgage is risky for both you and your brother. Consider these drawbacks carefully:
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Harm to cosigner’s finances – Their debt-to-income ratio rises, mortgage lenders may view them as overextended, and their credit could drop if you miss payments.
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Legal obligation for debt – Your brother would be 100% liable for the mortgage if you default. The lender can pursue legal action against him for the balance.
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Potential damage to relationship – Disagreements about finances or inability to repay could strain your relationship with your brother.
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Impact on cosigner’s future loans – Poor payment history on the mortgage could hurt your brother’s ability to qualify for credit in the future.
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Commitment for loan term – Your brother cannot easily be removed from the mortgage and would remain obligated for the life of the loan, which is usually 30 years.
Tips To Reduce Risks Of Cosigning For Family
If you decide to have a brother cosign your mortgage, take steps to reduce risks:
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Be conservative with the loan amount – Make sure your income supports the payments comfortably. Don’t obtain the maximum loan possible.
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Maintain solid payment history – Making timely monthly payments protects your credit and shows responsibility.
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Refinance when possible – If you build enough credit, you may qualify to refinance the loan solely in your name later.
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Keep cosigner informed – Share details like account statements and changes in your finances openly.
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Create contingency plan – Discuss options like selling the home or alternate living arrangements in case you struggle with payments later.
Alternatives To Family Cosigning Your Mortgage
If your brother is hesitant to cosign, consider these options instead:
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FHA loan – Requires just 3.5% down payment and is more flexible on credit scores.
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VA or USDA loans – Offer 100% financing and limited credit requirements for those who qualify.
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Loan programs for first-time buyers – State/local programs provide down payment support or lower interest rates.
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Using a gift or grant for down payment – This reduces the loan amount you need to finance.
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Build credit – Pay bills on time and lower balances before applying.
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Save for larger down payment – Allows you to qualify for a lower loan amount.
Have A Frank Discussion First
Before formally asking your brother to cosign your mortgage, have an open and honest discussion covering both the rewards and risks for each of you. Understand it is a major obligation that could have unintended financial consequences down the road. Make sure you look at all alternatives, like FHA loans or down payment assistance programs. With thorough evaluation and communication, you can make the best decision about whether mixing family and finances through a cosigned mortgage is advisable.
More on Mortgages & Homebuying:
: iStock
When to Use a Cosigner on a Mortgage – How does cosigning work?
FAQ
Can a family member cosign a mortgage?
Co-signers can be family members or friends, and their income can help meet the loan’s debt-to-income ratio. Co-signer requirements for FHA loans: Co-signers may qualify with lower credit scores. However, they still need to provide proof of income and meet any debt-to-income ratio limits.
Do banks allow co-signers on mortgages?
Family members often want to help each other, and lenders are more inclined to accept close relatives as co-signers. However, both parties must trust each other fully and understand the risks involved. Although less common, friends or business partners can co-sign or co-borrow a mortgage loan.
What credit score does a cosigner need for a mortgage?
For FHA loans backed by the Federal Housing Administration, co-signers typically need scores of at least 580-620, depending on other factors in the application. Apr 30, 2025.
What is the downside to cosigning a mortgage?
The biggest risk of co-signing is that you’re promising to repay the borrower’s loan, including late fees or collection costs, if they’re unable to do so. Before you co-sign, make sure you can cover the loan payments in case the primary borrower cannot.