As many of you may know, I was recently in Southern California for my wedding earlier this month. Standing there as Brittany walked down the aisle, I promise, I did not think about today's newsletter topic - cosigners  - but I felt it would be a good discussion based on recent changes (by the way, everything went flawless and the event was fantastic).

Every lender’s dream is to have a borrower with perfect credit, an income well into the 9-digits, and zero debt. However, not as many people fit this entire profile. In the Bay Area, qualifying for a mortgage on a property on your own requires quite a significant income and down payment. So what do most people do? Well, many buyers have one or more cosigners on the loan.

Many of you have probably heard of
 cosigning before (you can co-sign on pretty much any type of debt obligation i.e. student loans, car loans, etc.). What many people do not always realize is that ownership and liability for the debt can be completely separate people.

1) The Mortgage. Many couples (and newlyweds) purchase a home to "start" their family. As the couple begins the process for the house hunt, they almost always will speak to a lender about using both of their incomes to qualify for the loan. Usually, combined the couple's debt-to-income ratio is lower and as a result they can afford a higher monthly mortgage payment (i.e. typically a higher priced home). Thus, couples tend to both sign the mortgage as the bank is only concerned about getting paid back (the more people on the hook for the mortgage, the better - assuming they all pay their debts). This is much different than both being on title (and how title is vested).

2) The Title. Taking title to the property (and how title is taken) is a completely different topic than a mortgage. You might want to consider title as an ownership interest. In fact, there can be one, or two, or three, or more people all on title (just as there can be one, or two, or three, or more cosigners on a mortgage). The individual(s) on the mortgage can be completely different than those on the title.

MinnGo ends up speaking to quite a few investors each week. Depending on your goals in real estate (i.e. family home vs. 20+ rentals in the next 5-years) the strategy you use might be completely different. I have yet to come into a situation where someone is on the title of too many properties, but a concern for some of our investors is being on too many mortgages (restrictions tend to apply only per a person so many couples will actually both be on title for their rentals but only one will be on the mortgage). If this is something you would like to discuss further, we are glad to discuss in more detail.

Lastly, please be on the lookout for some changes in the very near future! Some big things are happening and we can't wait to share in all of the excitement with you.


If you ever have any questions at all, please do not hesitate to reach out. At MinnGo, we realize that real estate is not something our clients think about everyday. Lucky for you, that is what we live and breath.

Until next time.

Cheers,

Ryan