One of the biggest issues that most individuals have after they graduate university is the fact that it is difficult to keep up with all the monthly expenses. In most cases, these consist of student loan payments, rent, transportation fees, utility bills, and others. The fact that graduates usually have no financial history, thus do not yet have a good credit score. Furthermore, most of these expenses need to be paid even during the time that individuals are either unemployed or looking for a job. This having been said, the biggest monthly expense, for most people, tends to be the rent.
What most do not realise is the fact that they can purchase a home, right after they graduate, even if they do not have a high enough credit rating for a loan. This can be done by having someone co-sign the mortgage. Here is what a co-signed loan is and how you can apply for one:
What Is a Co-Signed Mortgage?
Regular loans come with terms and conditions that are based on an individual’s credit report. However, fresh university graduates usually have poor credit ratings or a short financial history, both of which are not enough to qualify them for a proper mortgage. Getting a co-singed mortgage means that an individual applies the loan (the money is borrowed in under his name), but also finds someone else to guarantee that the money will be repaid without any issues. A co-signed loan uses both the credit report of the borrower as well as that of the co-signer.
Generally speaking, the co-signer acts as a safety net that ensures the lenders that they will get the money back even if the borrower cannot repay it. The primary advantage of a co-signed mortgage is the fact that it enables almost anyone to get one, regardless of their financial situation or their credit rating.
Who Can Become a Co-Signer?
The restrictions that establish who act as a co-signer can differ from one lender to another. However, in most cases, relatives will be eligible for this role. They are also the safest choice for most individuals because it allows the borrowers and co-signers to stay in contact at all times. For the most part, borrowers tend to choose their parents or siblings as co-signers. Regardless of who you choose, keep in mind that the person should have a good credit rating and have built up his credit score so that you may benefit from their financial stability.
What Are the Other Advantages of Getting a Co-Signed Mortgage?
Having someone to co-sign your mortgage offers several advantages, on top of the fact that it is possible to get the loan even with a low credit rating.
First of all, the borrower benefits from the co-signer’s credit rating, meaning that he is likely to get a lower interest rate and better overall terms and conditions. Furthermore, getting a co-signer, especially a parent also offers a lot of peace of mind, since he will be able to make the payments that the borrower is unable to. This can be of great help to graduates who also have to repay their student loans while paying their mortgage. Secondly, a co-signed mortgage can help increase the credit score of the borrower, allowing him to build up his financial history and make it more likely that he will get great deals in the future.
Lastly, getting a co-signed mortgage may allow some individuals that already have a good credit rating to get more money and, as a result, purchase a larger home.