What is the difference between a cosigner and a co-borrower?

Many clients and agents ask about the difference between a cosigner and a co-borrower, especially first-time buyers! And the difference is relatively slight. The differences are in red below.

Cosigners

Cosigners (or guarantors) agrees to be responsible for the borrowers debt if the borrower is not able to do so. Here is the breakdown:

Do not have ownership interest in the subject property as indicated on the title
Sign the mortgage or deed of trust note
Have joint liability for the note with the borrower
Do not have an interest in the property sales transaction
Must meet general borrower eligibility requirements except for provisions related to establishing ownership interest
Are permitted on purchase, limited cash-out, and cash-out refinance transactions (in some cases)
Must sign the note but are not named in (or required to sign) the security instrument

Co-borrowers

Co-borrowers shares ownership and financial responsibility for a loan. Here is a detailed overview:

May have ownership interest in the subject property as indicated on the title
Sign the mortgage or deed of trust note
Have joint liability for the note with the primary borrower
Do not have an interest in the property sales transaction
Must meet general borrower eligibility requirements
Are permitted on purchase, limited cash-out, and cash-out refinance transactions (in some cases)
If they have an ownership interest in the property, they must sign both the note and the security instrument

Other Helpful Information:

We specifically use the term “co-borrower” to describe any borrower other than the borrower whose name appears first on the note. Furthermore, both cosigners and co-borrowers use their credit for qualifying purposes.

Some loan programs don’t allow co-borrowers and cosigners if they do not live on the property. VA loans and some jumbo loan programs do not allow a non-occupant co-borrower. However, conventional, most jumbo options and FHA does. Note on VA loans: if one of the borrowers is not a veteran, they must be married to the veteran to qualify for a loan (for example, A Vet’s boyfriend/girlfriend isn’t allowed to be a co-borrower). If you have questions about co-borrowers and cosigners, connect with Joel today!

What is the difference between a cosigner and a co-borrower?