(877) 477-4335
Get a Quote Apply Now

What Does It Mean To Cosign On A Mortgage?

Have you been asked to cosign by someone looking to get a home loan approval? You may be wondering why they would ask or how this affects you. This article will help you to understand both of these points.
Sep 01, 2021

Have you been asked to cosign by someone looking to get a home loan approval? You may be wondering why they would ask or how this affects you. This article will help you to understand both of these points. 

Why Were You Asked To Cosign? 

These are the top reasons that home loan applicants seek a co-borrower:

  • Income: People may ask for a cosigner to include more income on their mortgage application. Higher income on the application can make it easier to get approved or borrow more from the lender.
  • Credit score: Having someone with a higher credit score may help to secure a lower rate. 
  • Employment: Little or poor employment history can prevent mortgage approval. Having a cosigner with better employment history can aid in getting a mortgage.

Cosigner Responsibilities

Cosigning affects your credit and finances, so you must trust the person you're cosigning for. Should they be unable to pay the mortgage, the responsibility falls on you. Also, any late payments or foreclosures will negatively affect your credit score.

Additionally, this new debt could make it more difficult for you to get approved for future credit. Ironically, it could mean that the only way you could get a loan is by getting a cosigner, too. 

While there may be an option for the cosigner to be released from the loan, you should still be prepared to take over the mortgage (and accept the risks) if this option is not available. 

Cosigner Requirements: Occupant versus Non-Occupant

Non-occupant means that the cosigner will not live in the home, while occupant means that they will. Here's how that affects the loan:

For Conventional Loans

A non-occupant co-borrower on a conventional loan means that they are on the loan but not on the property's title. The co-borrower's credit is pulled, and the score is used to help determine loan qualification. However, the non-occupant co-borrower does not own the property. 

For FHA Loans

There are some restrictions with an FHA loan when it comes to a non-occupant co-borrower. First, you can have up to two non-occupying co-applicants. Second, the person occupying the property must have no more than a 70% debt-to-income ratio when the downpayment is less than 20%. 

Thirdly, non-occupant cosigners must be on both the title and the loan, and the property must be a single-family residence. Additionally, the non-occupant co-borrower must be a relative. 

The Bottom Line

Of course, this article doesn't cover all the requirements for cosigning on a mortgage. But it does help you to better understand your responsibilities as a cosigner and how to qualify with one. Need help getting approved for a home loan on your own? Need more answers about cosigning on a mortgage? We're here to help! Contact us today for all your mortgage needs. 

✅ Benefits of Contract Loan Processing for VA Loans

  1. Specialized VA Knowledge

    • VA loans have unique requirements (COE, residual income, funding fee calculations, appraisal requirements).

    • A contract processor experienced in VA loans can spot potential issues early and streamline the process.

  2. Cost Savings for Lenders

    • No need to hire full-time staff; processors are paid per file.

    • Helps smaller brokerages or lenders manage fluctuating loan volumes without carrying extra payroll.

  3. Faster Turn Times

    • Contract processors often work remotely and are paid per closed file, so they’re incentivized to move loans quickly.

    • They can push COE requests, follow up on VA appraisals, and ensure VA-specific forms (26-1880, 26-8923) are completed on time.

  4. Compliance & Accuracy

    • VA has strict guidelines (e.g., allowable fees, seller concessions, and veteran protections).

    • A skilled processor reduces risk of compliance errors that could lead to loan buybacks or funding delays.

  5. Scalability

    • During high volume seasons (e.g., rate drops, PCS military moves), lenders can bring on extra processors quickly without long-term HR commitments.

  6. Reduced Loan Officer Burden

    • Lets LOs focus on originating, networking, and serving clients while the processor handles gathering DD-214s, income docs, pest inspection reports (if required), and underwriting conditions.

  7. Improved Borrower Experience

    • Veterans and active-duty borrowers often value clear communication and speed.

    • A processor who knows the VA process can anticipate documentation needs and prevent last-minute surprises.

👉 In short: Contract processors help lenders stay lean, compliant, and efficient, while ensuring veterans have a smoother experience.