Does co-signing make you a co-owner of a home?

You are probably familiar with stories like this: a person with poor credit wants to buy a home in Santa Cruz. He or she approaches a family member or friend with a good credit rating and asks him or her to co-sign on a mortgage. If your familiarity with such a scenario is due to you actually being involved in one, then you may naturally have the following question: Does co-signing on a home loan make you a co-owner of the property

According to Zacks Investment Research, the answer to that question is no. As a co-signer, you simply assume liability for the loan. If your friend or family member is unable to make the mortgage payments, you are left with ensuring that the lender gets paid. However, co-signing does not give you security interest in the property, so you cannot assume control of the home if you are forced to settle the mortgage. Co-signing can also negatively affect your credit if your loved one defaults on the loan. If he or she ends up declaring bankruptcy, the lender can them come after you. 

However, if you are a co-borrower of the loan, then you do share ownership. When co-borrowing, you not only lend your strong credit profile to your family member or friend, but your own financial information is considered when determining the borrowing capacity. The two of you sign the loan paperwork together and are considered jointly liable in repaying it. This not only allows you to leverage your ownership to ensure that your loved one meets his or her payment obligations, but it also reflects positively on your credit report as the loan is repaid. 

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