Co-signer
Somebody who takes on full liability for another person's loan without necessarily owning anything.
What it means
A co-signer signs the note. That makes them liable for the debt in full, not for a share of it, and the lender may pursue them if the borrower does not pay.
A co-signer is not automatically an owner. Ownership is set by the deed, liability by the note, and the two come apart in both directions: a person can be liable for a house they do not own, and can own part of a house they are not liable for.
A co-borrower is a different thing again. Co-borrowers are on the note and, in most programs, on the title as well.
Why it matters
The obligation generally appears on the co-signer's credit report from the start and counts against their own borrowing capacity, which matters to anyone who may want to refinance, downsize or borrow themselves.
Coming off the loan afterwards usually requires the loan itself to change, through a refinance in the borrower's name alone, an assumption the lender agrees to, or a sale.
If the co-signer dies, the obligation is a claim against their estate and can reduce what other beneficiaries receive.
When you are likely to meet it
- When a buyer cannot qualify alone and a relative is asked to sign.
- When missed payments appear on a credit report belonging to somebody who does not live in the house.
- When an estate is being administered and an old co-signature surfaces.