We finally finished digging ourselves out of a financial hole, have good credit and are finally saving money. We’re planning to put a downpayment on a little house within the next 3 years and everything is marching smoothly toward that. And then I get a call from his mom.
“I want to sell my house that I have $180K equity on, and get a mortgage on a new one, and I was wondering if my son would co-sign. I’ll give him $15K from the sale of my current house.”
I guess she needs his income for the mortgage application because she runs a home hair salon under the table and rents out an efficiency illegally and that’s where her income comes from. She says she’d be able to take him off the mortgage after a few months. Is this true? Should we consider it? Why does his mom always get the family mixed up in her convoluted financial schemes?
When it comes to family, it’s natural to want to help out in any way possible. However, when it comes to financial matters, it’s crucial to consider the long-term consequences of your actions. In this case, co-signing your mother-in-law’s mortgage could have severe repercussions on your own financial stability and future plans.
First and foremost, the obligation of a co-signer is not to be underestimated. By agreeing to co-sign, one essentially embraces the entirety of the mortgage responsibility. Should there be any lapse in payments, the co-signer is not merely a backup but stands front and center, required to shoulder the financial burden. This is not a contingent liability; it’s as direct and binding as if the co-signer were the primary borrower.
If your mother-in-law is unable to make the mortgage payments and you are unable to cover them, you could face the possibility of foreclosure on the property. This could have serious consequences for your own financial future and could make it difficult for you to obtain credit or loans in the future.
Moreover, removing yourself from the mortgage in the future may not be as easy as your mother-in-law suggests. In order to take you off the mortgage, your mother-in-law would need to refinance the loan under her own name. However, if she doesn’t qualify for a mortgage now, it’s unlikely that she will qualify to refinance in the future without your income to support the application.
It’s also important to consider your own financial goals and plans. If you are planning to purchase your own home in the next few years, co-signing your mother-in-law’s mortgage could seriously jeopardize your ability to do so. When you apply for a mortgage, lenders will take into account your debt-to-income ratio, which includes any debts or obligations you have co-signed for. By co-signing your mother-in-law’s mortgage, you will be taking on a significant amount of debt, which could make it difficult or impossible for you to qualify for your own mortgage.
While it may be difficult to say no to a family member in need, it’s important to recognize that you cannot financially support both your mother’s mortgage and your own home-buying plans. You must choose one or the other.
By focusing on your own financial future and the home you plan to purchase with your partner, you are setting yourself up for long-term financial success and stability.