Mortgage qualification doesn’t always have to be a solo journey. If your income, credit, or overall finances aren’t meeting the standards for approval, adding a coborrower or cosigner may help you qualify, depending on the lender and loan program you choose.
While both options can strengthen your mortgage application, they play different roles when it comes to responsibility, ownership, and impact. By understanding the differences, you’ll be better prepared before asking someone to be a part of your homebuying process. Let’s break down how coborrowers and cosigners work, when each role makes sense, and how to decide which options best support your path to homeownership. Keep in mind: terms and eligibility may vary by mortgage program and lender guidelines.
A coborrower, also sometimes called a joint applicant or a co-applicant, is a person who applies for the mortgage loan with a primary borrower. Both the primary borrower and the coborrower will complete an application, where a lender considers both sets of qualifications, assets, credit, and income. Once approved, both the borrower and coborrower are legally responsible for repaying the loan. In most cases, coborrowers are also listed on the property’s title, which gives them ownership rights, although ownership ultimately depends on how the title is structured.
In general, any adult who meets lender requirements and is willing to assume legal responsibility for the mortgage can be a coborrower. This may include relatives, friends, domestic or long-term partners, or spouses. In some cases, a coborrower may not live in the home (known as a non-occupant coborrower) depending on the loan program.
Adding a coborrower that is your spouse or long-term partner often makes sense for some borrowers. It acknowledges your shared responsibility and interest in living in the home together.
A coborrower could also make sense for solo borrowers who may have a harder time qualifying for a loan, such as first-time homebuyers. By adding a coborrower with a strong financial history, a primary borrower may be able to qualify for more money or better loan terms.
Two factors that are weighed heavily during your mortgage application process are your credit and your debt-to-income ratio (DTI). DTI is measured by dividing your monthly debt by your gross monthly income. The ideal DTI is dependent on your loan program, but lower is generally better. With a low DTI, you demonstrate that you have a healthy balance between ongoing debt and your income. This is a signal to lenders that your finances can handle an additional monthly payment.
By adding an additional borrower to your mortgage, you may improve your DTI if the additional income outweighs any added debt. This is because your combined finances are considered, unlike if you were to apply on your own.
It’s important that both parties understand the long-term implications when applying for a loan together. If one borrower is unable to make payments, the other borrower remains fully responsible for the entire mortgage. Missed payments will negatively affect both borrowers’ credit.
Let’s say a person applies with their spouse as a coborrower on a mortgage. If the relationship were to break apart for any reason, both people would still have to make joint mortgage payments. In most cases, removing a borrower requires refinancing the loan or selling the home.
A cosigner signs the mortgage loan and agrees to be equally legally responsible for repaying the debt, even though they typically do not have ownership of the property and are not listed on the property’s title.
Typically, a cosigner is a family member or loved one that has a higher credit score and income than the borrower. However, cosigner requirements are dependent on your loan program, so it’s best to speak with your Loan Originator about your options.
Adding a cosigner to a mortgage is beneficial if the borrower has little to no credit history, a low credit score and income, or a high debt-to-income ratio. If a potential borrower needs assistance qualifying for a loan, adding a cosigner can provide reassurance to the mortgage lender that the monthly payments will be made. This is especially helpful for first-time homebuyers or a borrowers with limited credit history who need more support to qualify.
As previously discussed, two of the major factors that determine your loan affordability are your debt-to-income ratio and your credit history. A higher debt-to-income-ratio indicates that the bulk of your income is going toward debt. This can be seen as risky for a lender because a mortgage is an additional and long-term debt.
If your cosigner is in a better financial position with their income and credit, it may help you qualify for more favorable loan terms or potentially a better interest rate, depending on the lender and loan program. Additionally, making the necessary monthly mortgage payments may help build credit if payments are made on time.
When a person agrees to be a cosigner on a mortgage, they are taking on financial risk to help the borrower qualify for their loan. Cosigners are equally responsible for repaying the mortgage debt as the borrower, even though they typically do not have ownership of the property.
If payments are missed, the lender can require the cosigner to make the necessary monthly payments without first pursuing the primary borrower. Missed or late payments may also negatively affect the cosigner’s credit, just as they would the primary borrower’s credit. This obligation may affect a cosigner’s DTI and the ability to qualify for new credit, such as a mortgage, auto loan, or personal loan.
Both coborrowers and cosigners are equally and fully responsible for repaying the mortgage loan.
Both coborrowers and cosigners can help strengthen a primary borrower’s mortgage application by contributing qualifying income, credit, and financial stability.
Typically, a coborrower has ownership rights and is listed on the property’s title, meaning they share both legal ownership and repayment responsibility. In contrast, a cosigner is usually not listed on the title and does not have ownership rights. Instead, a cosigner agrees to take on legal responsibility for the loan without having a typical ownership interest in the home.
Coborrowers often live in the home with the primary borrower, while cosigners typically do not occupy the property and primarily serve as financial support.
Both cosigners and coborrowers have the mortgage listed on their credit report. This debt is included in their financial profile and may affect their ability to qualify for new loans until the mortgage is paid off, refinanced, or otherwise removed.
Learning about coborrowers and cosigners will help you make more informed home financing decisions. While both roles can help you qualify for a loan, there are distinct differences when it comes to legality and ownership.
As your mortgage guide, we can help you reach home financing success in a way that works for you—whether you’re applying with a cosigner, a coborrower, or on your own. Connect with a Loan Originator to start your journey.
Homestead Funding offers exceptional customer service and a convenient mortgage process. Whatever your financing needs, our goal is to exceed your expectations.
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