The economic downturn over the last few years has left many people’s credit scores somewhere in the gutter. As a result, it is decidedly more difficult for millions of Americans to qualify for a home loan. If you have solid credit and a loved one approaches you to co-sign for a home loan for a Phyllis Frankel Realty Group home, what do you do?
Although the answer to this question will vary depending on a number of factors – most of which are very personal – you may want to think twice before you dive into this large, financial situation. Here’s why:
· Damage to your credit score – Your credit score may take a hit if you co-sign for a home loan for a loved one, regardless of whether your loved one keeps the home loan in good standing. This is because your debt load will skyrocket when you add another mortgage to it. This could very well adversely affect your ability to get the lowest rates on everything from a car loan to a personal loan. And let’s not even get started if your loved one should fail to make timely mortgage payments…
· Damage to your financial situation – Although you may not think it will ever happen, what would you do if your loved one bails on the home loan and leaves you holding the loan? Could you cover the monthly mortgage payments? Would the home loan become delinquent? No one ever wants to think about worst-case scenarios, but in the realm of home loans, it pays to consider every possible scenario.
· Damage to your relationship – Many financial experts have said the same thing throughout the years: never take out a loan for a loved one! This is because, time and time again, relationships have been strained – even completely demolished – as a result of disagreements over money and loans. Consider the value of your relationship and whether you and your loved one would want to risk it over a home loan.