What defines love? Some would say trust is at the heart of that answer; others may say communication. 23 Legal believes all these things are needed when embarking on any real estate endeavor with a loved one—especially when co-signing on a home.
Are you in a serious relationship, ready to take the next step of purchasing a property together? Not sure what it takes to co-sign on a home with someone in Illinois? Before you love birds sign the dotted lines on any legal document, take a moment to read our guide.
Learn what you should know before co-signing on a home in Illinois…
What does it mean to co-sign with someone? A co-signer adds their name and credit to the primary borrower loan application. The co-signer legally must ensure the loan doesn’t default if the primary cannot pay! By agreeing to co-sign on a loan, the co-signer becomes responsible for the loan amount and any additional payments that may occur in connection with an approved loan. Generally, a person would co-sign on a home loan to receive a better interest rate. The co-signer has a substantial credit or longer/stable credit history. Banks will feel more comfortable agreeing to higher amounts of money when a strong candidate backs a loan.
“Most people want or need a co-signer because they can’t qualify for the loan by themselves. If you have a strong financial profile, co-signing for someone with a lower credit score or thin credit profile can improve their odds of qualifying or snagging a lower interest rate.” Nerdwallet
Find out why having a real estate attorney is always a must when making real estate transactions!
What is a co-borrower? Being a co-borrower is an additional option if your partnership has equal credit scores and financial stability; being a co-borrower is a different option. Co-borrowers take full responsibility for the loan. Generally (but not limited to) married couples apply for this type of credit line.
Bankrate gives a quick breakdown of the differences between co-signing and co-borrowing.
Co-signers:
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- Have no title or ownership in the property the funds are for.
- If the primary signer falls behind, they are legally obligated to repay the loan.
- Must have their income, assets, credit score, and debt-to-income ratio considered in the loan application.
Co-borrowers:
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- Are you on the title or have some claim to the property?
- Split the repayment obligation equally with the other borrower.
- Must have their income, assets, credit score, and debt-to-income ratio considered in the loan application.
Tips for co-signing on a home with a loved one…
Don’t avoid tough conversations! With significant financial responsibility tied to co-signing and obtaining a loan, it’s vital to have serious conversations about your finances! While discussions about money may make you feel uncomfortable, talking about financial matters can make your union stronger. Thus ensuring you’re on the same page with your partner. As a real estate attorney, Ben Weaver has been involved in many home closings, home sales, and even the development of a family’s real estate planning. Ben has noted that couples that sit down to plan out their financial decisions tend to have the most successful real estate experiences.
Here are a few helpful points to bring up during these conversations:
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- What is your credit score?
- How much do you both earn annually?
- What are your spending habits, and how can they be improved?
- How do you want to divide financial responsibilities within the household?
These questions are a great starting point for couples looking to merge their financial responsibilities by purchasing a home and co-signing on loan.
Who can co-sign on a property together? Whether you are in a marriage, serious relationship, commonwealth union, or a family member trying to help a loved one at the start of their adult life. As long as you are willing to connect your finances with this person, your relationship status or union is your business!
“When you co-sign on a mortgage loan, you’re putting your financial resources behind the loan. This can help the borrower get much better interest rates and loan terms than they could achieve on their own. Your support and attention to ensuring payments are made on time can also help your family member build a good credit rating.” Chase
Work together in choosing the property you are co-signing on. Do the footwork spend time researching real estate trends and predictions for this year. Couples that research together lay a stronger foundation for their future. Before you sign a contract with a realtor, decide what area you’d like to move to and if that location is suitable for your family. Investigate what the real estate market looks like in your desired location. If you are thinking about having kids or already have some, this may be a factor in finding a neighborhood suitable for your family.
“Ben helped us close on our house and could not be happier with his assistance. He is very responsive regardless of time. His knowledge of the process is second to none. Without his assistance, we don’t believe we could have closed on time.” Client Testimonial
What does the process of co-signing on a home look like? Now that you’ve had the tough conversations and chosen the area or property you want to pursue, here are the basic steps you need to take to co-sign with your partner successfully.
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- Check your credit together; there are several free resources to check your credit score successfully. This will give you a good idea of who will need to be the co-signer on loan.
- Organize your finances – Start the process of outlining the amount of money you will need to budget for months to maintain your loan each month. Use loan calculators to get an idea of your current finances.
- Get pre-approved before you start house hunting!
Stay positive during this experience… Buying a home can be overwhelming, but the fear of the unknown can leave many people uncertain of taking steps towards being on loan together. A great solution to that is having a knowledgeable lawyer like attorney Ben Weaver. He can walk you through the process of co-signing and much more. Asking questions is the best way to advocate for your partnership. Remember to be kind to yourselves as you take this journey together. By obtaining the aid of an attorney with your best interests at heart, you will reduce the chance of unnecessary confusion and avoidable conflict in your relationship.
Bonus: 3 tips for leading with love this month
- Helpful financial tips for cleaning up your credit with your loved one.
- Meaningful gifts that help your family stay financially stable this year.
- Give the gift of real estate planning! You are never too young to understand the basics of estate planning.
Co-signing on a property with your partner doesn’t have to be a stressful experience, it can actually be an act of true love and trust. Feel confident while co-signing and buying a home in Illinois with the assistance of attorney 23 Legal!
Fill your heart with a sense of peace this February by hiring the aid of caring and knowledgeable real estate attorney Ben Weaver.
Please feel free to contact us for assistance or any questions you have. Click here to read 5-star client reviews!
Why Choose 23 Legal
23 Legal offers Real Estate and Estate Planning legal services to individuals, families, community associations and small business owners throughout Chicagoland. We know how intimidating “the law” can be. In fact, when most people think of law offices, they think of stuffy leather chairs, huge wooden desks and pompous lawyers who charge outrageous fees. That’s not us! We believe in 1-to-1; the same lawyer should work with you all the way through. Whether you have an estate planning issue, family trust concern, or you have a legal problem in regard to a new home, business, real estate or remodel, you need a lawyer who cares. That’s where Ben comes in! We are great listeners; more than that, we are lawyers who believe that our clients always come first.
