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Co-Signing a mortgage for daughter!? (And son-in-law)

BigDill said:
@WICHITAREJECT just for my own curiosity, is there a reason why you are considering the “co-sign” route as opposed to the “co-purchase”?
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Didn’t know there was such a thing! I better be asking more questions....
 
WICHITAREJECT said:
Didn’t know there was such a thing! I better be asking more questions....
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For me it’s the best way to go in this situation. When they are in a stronger financial position, or if they pay down the mortgage, then they can refi you out. That way if they can’t make the payments, you can either make them and seek repayment, or force the sale.
 
Good luck with your decision. I try not to mix business with family if at all possible. It usually doesn't work out very well and relationships can change due to it.
 
WICHITAREJECT said:
Any of you have daughters by chance?
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I have daughters and we've already (kind of) gone through this. The conversation basically went like this. "If you can't get approved for an amount to buy the house that you want, then you can't afford the house. Keep shopping becuase I can't afford to take on the debt for a house that already can't afford". Yes it was tough to "break the news" She got over it and the only mortgage hanging over my head is my own. Don't do it.

Now, the conversation that I had with my daughter was more hypothetical. My daughter brought up the subject, hinting that they would possibly need a co-signer if they were to buy a house (which they've been looking for about a year). So I nipped it in the bud before she actually came to me with the "Daddy" conversation. Don't do it, man. If they could actually afford the house they would have been approved for the amount.
 
WICHITAREJECT said:
A little more backstory. Son in-law runs his own tree service. He needs extra room for truck and trailer. So I suggested the property (1 acre) and the higher purchase price and offered the co-sign upfront. So it was my suggestion and not their careless overspending behavior. Does that change any opinions?
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Yep. You f***ed yourself. Good luck. :LOL:
 
I am a bit surprised at the amount of sentiment that if they borrowers don’t qualify, they can’t afford it. Mortgage lending qualification is, in my opinion, more complex than that. OP said they the SIL has his own tree business, and getting qualified as a new small business owner is difficult. Add in student loans or a new truck payment or a trailer and I can see why they would otherwise be able to afford the house they want but can’t qualify for it when applying a ~35% DTI ratio. In the order of operation, your house is typically the last loan you default on, with credit cards and student loans being much more likely. Without more information, I don’t think we can conclude that they can’t afford it. I recall something about them being approved at $160k. Assuming a 3.9% interest rate, that’s ~$750/month P&I, so about ~$1200 with insurance and taxes, I assume. Bump that up to $200k and it adds about $200 per month. Not a huge jump.

Also, for what it’s worth, most loans will not let you take on debt to purchase besides the mortgage, so a loan from the parents would have to either be a gift, or would have to be seasoned and then the loan part would have to be a “handshake agreement”.

Here is another idea @WICHITAREJECT, see what debt they have which, if removed, would help them qualify for the loan. Can you do anything to alleviate that debt? For example, can they sell their car and remove that obligation, even at a loss? And then you can co-sign the new car. Or a trailer. Or equipment, etc. Maybe even a credit card debt. Think outside the box if you don’t want to co-sign a 30 year loan.
 
SIL is also part time auto mechanic so they are relatively debt free. He wheels and deals cars and trucks like most of us do golf clubs. Daughter has no student loans, we paid those off already. Thinking outside the box is not my strong suit......I am a Reject
 
WICHITAREJECT said:
SIL is also part time auto mechanic so they are relatively debt free. He wheels and deals cars and trucks like most of us do golf clubs. Daughter has no student loans, we paid those off already. Thinking outside the box is not my strong suit......I am a Reject
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If you're rethinking your offer to cosign, you can say "we paid off your student loans for you" and call it square...

Honestly I don't know what I'd do... the need for land to park the truck can make a difference but still... maybe they should readjust their wants/needs and look in different areas for less house for less money with more land?
 
I don’t like co signing for anything. Just invites trouble if something happens. I borrowed some money from my mom to buy my first house. A loan is a better route if possible in my opinion.
 
I would co-sign for one of my kids when the time came on a loan the size you are considering. I’d rather have them wait to save up a larger down payment and not be stretched to the max loan they are eligible for. Being house poor is not a fun situation but is often exactly what a young couple needs. My wife and I were there briefly the first 2 years of our marriage and learned a lot about budgeting and cutting wasteful spending.
 
ApexFan said:
I don’t like co signing for anything. Just invites trouble if something happens. I borrowed some money from my mom to buy my first house. A loan is a better route if possible in my opinion.
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Getting help on you first house is a HUGE benefit, wouldn’t you agree?
 
tahoebum said:
I would co-sign for one of my kids when the time came on a loan the size you are considering. I’d rather have them wait to save up a larger down payment and not be stretched to the max loan they are eligible for. Being house poor is not a fun situation but is often exactly what a young couple needs. My wife and I were there briefly the first 2 years of our marriage and learned a lot about budgeting and cutting wasteful spending.
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Seems like you crazy kids did OK for yourselves.....I hope the same for my crazy kids.....
 
I just had this situation with my daughter and SIL, both have good, stable careers but the underwriting process was horrendous. In the middle of it I decided to fund the mortgage myself and write a private mortgage agreement with them. If I’m on the hook anyway I’d rather make more money then a money market will pay me right now.


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WICHITAREJECT said:
Getting help on you first house is a HUGE benefit, wouldn’t you agree?
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It sure can be. It’s very different based on locations. I bought my first house for $550k in the 1998. Now that 1100 sq ft house would be 1.3 million. Other parts of the country a nice house can be had for a down payment here. It can be difficult to get your foot in the door in some places. So yes some assistance can be a benefit. I’m still not a fan of co signing.
 
I asked my parents once, when I was 19 years old (for $1,000) and been free and clear the 20 years. There's no way I'd have ever asked them to co-sign when I bought a house, sure they'd have said yes but I wouldn't have felt right about asking. But I don't like the idea of anyone holding anything over my head. I just think there's a certain pride in doing something on your own. But that's just me.
 
I guess I should add that payment history and responsible spending habits would effect my opinion on this matter. Also your relationship with them. I assume it’s pretty darn good since you made the offer. I’d try and come up with a plan to refi at a later time and have them qualify on their own. This can be tough depending on rates but is a common route for purchasing a home. In my situation I’d of gotten priced out had I not gotten in when I did. We all want the best for our kids. Now if my son wanted to buy here in the Bay Area I’d tell him he’s nuts. Move out of the area.
 
If it's to buy more house than they can afford, then no.

If it's for a lower rate as someone mentioned, and they can afford they payments, then hopefully all will work out.

They will have to learn to live within their means, budget expenses, cut back on going out, etc. It could even be a starter home, something smaller for now that they can fix up over time and then either sell for profit or rent out and keep paying out that principal.

That's what I did for my condo. Had it for 4 years, sold it for 8% more than purchased (I would have rented it out but it was in my contract I couldnt), etc, and we bought our dream house that well be in for 30+ years
 
While I do not have kids, I know that I would never co-sign on any loan of any kind. I have seen that done in my family and friends in the past and there was always tension till the debt was paid off. If they can't afford the house on their own....my opinion is they need to save for a bigger down payment.
 
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