Minimum Credit Score For Mortgage With Co-Signer

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If you have a loved one who can afford the costs of homeownership but whose credit or employment history prevents them from qualifying for a mortgage, co-signing a mortgage can be a helpful gesture.

However, you take on a lot of risks as a co-signer with few rewards and little recourse if things don’t work out.

When you co-sign for a mortgage, you are using your own resources to support someone else’s application, much like when you co-sign for a credit card or a lease.

Lenders consider an applicant’s debts, income, and credit history when deciding whether to approve them for a mortgage. If someone co-signs the mortgage, their financial situation will also be taken into account. When a borrower needs a co-signer, they typically turn to friends or family who have better credit or a lower debt-to-income ratio (DTI), which can increase their chances of getting approved and help them get a better rate or bigger loan amount.

Co-signers, like the primary borrower, are legally obligated to repay the mortgage. In the event that the borrower defaults, the lender will contact the co-signer.

What credit score is needed for a co-signer? As a co-signer, you stand in the primary applicant’s place during the approval process. You’ll need a minimum 580 median score for an FHA or VA loan. For a conventional loan, Rocket Mortgage

Rocket Mortgage
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® requires a qualifying score of 620.

The difference between co-signers and co-borrowers

When you co-sign a mortgage, you agree to be responsible for the loan but have no ownership interest in the home.

Co-borrowers are one or more borrowers who will jointly hold the property’s title and take out the mortgage. Two spouses applying for a mortgage jointly to buy a home that they will both own is an illustration of this.

Pros and cons of co-signing a mortgage

  • Help the borrower qualify for a mortgage they otherwise wouldnt. Some would-be homebuyers have sufficient monthly income to afford a mortgage, but due to things like student debt or having a too-short credit history, they have trouble getting approved.
  • Increase approval odds for those with unusual employment histories. Lenders can be somewhat strict when it comes to borrower employment histories. Those who have gaps in employment or recently changed careers might have trouble qualifying. Self-employed borrowers with less predictable income may also run into issues.
  • Your loved one can start building equity. If the person youre co-signing for has a solid history of making on-time rent payments, helping them qualify for a mortgage means theyll be able to start putting the money they were paying in rent toward their homes equity.
  • If the borrower is late on a payment, your credit will suffer (and you might not get a heads up before it happens). Your credit is tied to a co-signed mortgage the same as if you were the primary borrower. If the borrower misses a payment, your credit will take a hit. The lender might agree to notify you before this happens, but it isnt required to.
  • Youll be responsible for a mortgage on a home you dont own. Co-signing is essentially taking on the responsibility of getting a mortgage with none of the benefits of homeownership. Any payments you make will go toward a home you have no equity in.
  • To get out of the agreement, the borrower would likely need to refinance. If you no longer want to be a co-signer, the borrower will need to be in a good enough place financially where they can refinance into a mortgage they qualify for on their own.
  • Co-signing a loan can impact your ability to take on debt of your own. Even if all goes well with the mortgage and the borrower makes their payments every month, being a co-signer can still impact your future loan approval odds. Any debt youve co-signed may be included in your DTI, and if your DTI is too high, banks could refuse to lend to you.
  • Legal consequences, little recourse if the borrower stops paying completely. Because youre legally responsible for the debt but have no claim to the house, your options in this situation will likely either be to make payments on a home you have no equity in, or let it go into foreclosure and take a major hit to your credit. And if the foreclosure sale doesnt earn enough to pay off the remaining mortgage balance, the lender may be able to sue you for the difference.
  • Because co-signing can be so risky, it’s crucial that you, the borrower, and the lender stay in constant contact.

    You may want to obtain some sort of confirmation from the borrower you are co-signing for that they have a good history of on-time payments and that they are in a good position to make future mortgage payments, similar to how lenders look at applicants’ payment histories to understand how they have handled debt in the past.

    Making sure they don’t borrow more money than they can afford is part of this. They might be able to get a bigger loan thanks to your combined incomes, but they shouldn’t take on more debt than they can comfortably handle in terms of monthly payments.

    By requesting access to loan details from the borrower, such as through an online payment portal, you can also lessen the risk to your credit and ensure that the borrower is making payments.

    Minimum credit score for a mortgage with a co-signer

    You must have a minimum credit score to co-sign for the type of loan the borrower is attempting to obtain.

  • Conventional: 620
  • FHA: 580
  • VA: Some lenders require 620, but it could be higher or lower
  • USDA: 640
  • Co-signer requirements by mortgage type

    Not all mortgage programs and lenders allow co-signers.

    “Not all banks allow co-signers for all their loan programs, and when permitted, they might require an increase in fee or rate to allow a co-signer,” says Shmuel Shayowitz, president and chief lending officer at Approved Funding.

    Co-signers are permitted for conventional mortgages as long as they meet the general eligibility requirements. Someone with a stake in the sale, such as your real estate agent, cannot serve as a co-signer.

    Co-signers are permitted on mortgages backed by the Federal Housing Administration, but there are restrictions on who is eligible to sign. Co-signers on an FHA mortgage must reside in the US as their primary residence. Like with conventional mortgages, FHA co-signers must meet basic FHA mortgage credit requirements and cannot have a financial stake in the sale.

    Veterans and active duty service members who meet the minimum service requirements are eligible for VA mortgages. Co-signers are permitted by the VA on the mortgages it backs, but they must typically be a spouse or another veteran who qualifies for a VA mortgage.

    US Department of Agriculture-backed USDA mortgages are targeted at middle- to low-income people in eligible rural and suburban areas. Co-signers are not permitted on these types of mortgages, per the USDA handbook.

    Alternatives to having a co-signer

    You may still have other options if you’re a borrower who is considering asking someone to co-sign because you’re unsure that you’d qualify on your own, like:

  • Get a government-backed mortgage. These loans, which include FHA, VA, and USDA mortgages, often have more flexible credit requirements and allow smaller down payments, which can make getting a mortgage more affordable.
  • Take time to work on your credit. If youre not able to qualify for a mortgage right now, you might want to focus on improving your score. Paying down debt and limiting the amount of available credit you use (such as with a credit card) can give you a significant boost.
  • Seek out down payment assistance and homeownership programs. Government housing agencies and nonprofits sometimes offer things like grants that help you afford a down payment, or affordable mortgage programs for low-income individuals.
  • Wait until you have a stronger work history. Typically, lenders like to see borrowers who have been steadily employed in the same industry for the past two years.
  • Co-signing a mortgage FAQs

    Yes, co-signing a mortgage will affect your credit.

    Even if the borrower makes all of their payments on time, co-signing can raise your DTI and make it more challenging for you to obtain loans on your own. Although some lenders may have a different perspective on co-signed debt

    There are instances where the mortgage can be omitted, but Shayowitz notes that they would need to demonstrate six to 12 months of timely payments from a different account.

    Your credit report will also reflect any adverse loan-related information, such as late or missed payments.

    Typically, co-signers stay on the mortgage until it is paid off, whether through refinancing, selling the house, or when the borrower reaches the end of the loan term.

    Whether you want to co-sign a mortgage is up to you, but make sure you are aware of all the risks involved before you decide to shoulder the debt.

    If you co-sign a mortgage, you are accountable for the debt but have no ownership interest in the home. If the borrower stops making payments, this could put you in a risky financial situation.

    No. You only consent to repay the debt when you co-sign. It would be preferable to sign the mortgage as a co-borrower who is not an occupant if you want to be listed on the property’s title. You are a non-occupant co-borrower, which means you are legally responsible for the mortgage even though you don’t live in the house.

    Refinancing is typically the only way to get rid of a co-signer from a mortgage. For this to happen, the borrower’s financial situation will probably need to have improved so they can independently qualify for a mortgage.

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    Does my credit score matter if I have a cosigner on a mortgage?

    Mortgage lenders, however, typically consider the lower middle score of the two applicants’ credit scores from each of the three credit bureaus (Experian, TransUnion, and Equifax). Therefore, if the primary borrower doesn’t have a high enough credit score, a cosigner won’t always be a big help.

    Can you get denied a mortgage with a cosigner?

    The lender will reject the loan application if you or your co-signer’s credit score falls below the minimum standards set by the lender. If you and your co-signers have very different credit scores, the lender will base its decisions on the loan with the lowest credit score.

    What credit score does a cosigner need?

    If you intend to ask a friend or member of your family to co-sign for a loan or credit card application, they must have good credit and a long history of responsible financial behavior. Typically, lenders and credit card companies demand that your co-signer have a credit score of 700 or higher.

    At what credit score do you no longer need a cosigner?

    In most cases, a cosigner is only required when your income or credit score might not be sufficient to pass a financial institution’s underwriting standards. You probably won’t need a co-signer if you have a better credit score—typically 650 and above—and enough income to cover the loan payment.