I was working with a wonderful couple that was looking for a retirement home here in Coastal Delaware. They had just retired, their family home was for sale, and Kathy was working with them to find a new home. Well, they found the perfect home and applied for a mortgage. Everything had been planned out very carefully and they had no doubt their small loan would be approved. They had perfect credit, their credit scores were excellent but their loan was denied! What went wrong? Before they retired, they had co-signed for car loans for each of their three children. That made it impossible for them to obtain mortgage financing. The banks treated the guarantee of their childrens' auto loans as if they were actual debt.
Dont co-sign a loan if you will soon need to go out and borrow money for yourself. If your co-borrower misses payments or defaults, the loan will negatively impact your credit rating by showing up on your credit record as an unpaid debt just as youre trying to negotiate your own loan. This according to Lending Tree.
But today, even though their children were not delinquent on payments, the banks still considered their retirement income insufficient to cover those debts and their new mortgage. So, plan ahead and consider the impact of any financial decisions on your own future.