When your client is a first-time homebuyer, all of the documents that come along with the process can seem a little daunting – especially if they’re needing help financially to secure the home.
The millennial generation is coming in hot to the real estate market and most of them are first-time homebuyers. In 2018, millennial first-time homebuyers resembled 46% of the market. And while they are jumping aboard the home-purchasing train, it would still be beneficial to guide them through some of the trickier waters.
Trickier waters might mean co-signing.
If your client asks you about co-signing, it’s important that you encourage them to speak to a lender or a financial planning professional before taking any action. Then, feel free to share the following information with them.
The co-signer can expect this loan to take part of the debt-to-income ratio of your total income and restricts the ability to borrow additional money in the future. If the co-signer plans on making bigger purchases soon – a car, or their own home, for example – they might want to talk with their lender beforehand to see how it could impact their future borrowing.
Any delinquency will appear on the co-signers credit report.
The co-signer will be 100% responsible for the obligation. If for any reason the owner cannot make their mortgage payments, the co-signer will be considered responsible to continue paying.
As a real estate agent, you’re there to help your clients understand the ins and outs of buying a home. In terms of financing, you should be sure to clarify that it remains the responsibility of the homebuyer and the co-signer to discuss this option with a lender or professional planner to fully understand the pros and cons of taking this route.