A guarantor or co-signer assures payment responsibility if the primary borrowers default. They will enable the applicant to qualify for a mortgage, if on their own; the applicant(s) have to poor credit and/or insufficient income. A guarantors name will be on the loan but not the property and must be a spouse. Conversely, a co-signers name will appear on both tile and the loan, but can be any person that agrees and qualifies. There is a significant amount of risk involved in agreeing to be a guarantor or co-signer. If the borrower defaults, they are responsible for the full amount of the mortgage. So, lenders require them to qualify as if they were the sole applicants for the loan. Like a primary applicant, the lender will require a credit check and discloses of income, liabilities, and assets. Further, a guarantor or co-signer should consider how this would affect their ability to qualify for a loan in the future for their own personal purposes. Despite not making any real monetary contribution, the loan will be treated as if they have sole liability and included in their debt servicing calculations.
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