The decision of co-signing can be a very difficult choice. In some instances, it's very simple. If you're buying your home with your spouse, it seems natural that you would want to co-borrow on a mortgage. It would be joint property and because you plan to be married for life, it shouldn't be a problem.

However, the problem comes in when a friend or relative asks if you'd like to co-sign on a mortgage for a home. You've most likely done a great job building your credit and that is why the other person is asking you to co-sign.

Think long and hard about this. Co-signing means that you are responsible for the debt. If the other loan holder defaults on their portion of the loan, you will be responsible for it. This could mean a bad mark on your good credit or they could foreclose on your home and you'd have terrible credit, along with nowhere to live.

However, this could be a good choice for people who trust each other completely. Just proceed with extreme caution. Having a co-signer on a mortgage can increase the amount of mortgage borrowers can qualify for and give the buyers increase financial clout to lenders. This could result in better mortgage terms.

On the other end of the spectrum, some married couples opt to not co-borrow on a mortgage and instead only obtain a mortgage on one spouse's income. It's a good choice when one spouse has a shoddy credit history or if they are trying to keep from having all of their finances combined.

The bottom line on the choice to co-sign or not to co-sign for someone in your life, don't co-sign if you aren't comfortable with it in any way. You are putting your financial life on the line and in the end you'll be responsible.

Are you ready for that commitment? Most people aren't. The best alternative is to ask your friend or relative to explore other funding options or hold off until they can comfortably afford it on their own. That way you can keep your relationship, and your finances, healthy and on track.

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About the Author

Sean Watson is a licensed mortgage broker that lives in the state of Florida. He specializes in working with homeowners that have less than perfect credit and helps them do the things necessary to improve their credit ratings, so that they will no longer have to pay the higher rates and fees typically associated with having a blemished credit profile.