Should I co-sign on a friends house?

Question

About my friend: owns a house that zillow.com has a value of 550k right now (at the peak of the real estate buble 700k. His morgage is about $1500 a month I do not know how much he owes. He owns his own business but he is not doing well due to the economy. He needs to refinance to take money out to I am guessing make the payments and get through the tough times. He claims he got some credit cards out but has maxed them out and believe he is running into some delinquency with them and cant make the payment but again because of no income from his business. He is a smart guy. Do not know how much he needs to take out.

About myself: I currently rent at $1000 a month and have been approved to buy a house upto $400k. can afford about $2000 a month.

Should I co-sign for him to be able to refinance the house? What would happen if he could not make the payments? can I just tell him to get out and ill take over the payments.

I am hopeing this is an opportunity for me to jump in and take the house incase he is not able to pay for it at very low price. How can I do that with out any hassle? and if he pays fine he will make my credit that much better.

Any ideas???

Answer 1

No, do not co-sign a loan for your friend.  If he does not make the payments the bank will go after you.  At that point you could try telling the bank that he really lives in the house and he should pay, and that the bank should go after your friend, but they will still go after you.  Are you really talking about taking over your friend's house if he can't pay, because that's what it sounds like.  Also you don't seem to have much faith in your friend because you say "when he can't pay" instead if "if".  And do you really want to evict your friend if you own the house outright.  If he's looking for some help and you evict him when he doesn't pay you will lose this friendship.  If this guy is really your friend you will destroy the friendship by co-siging this loan.

Answer 2

I have been in mortgage lending for over 15 years, and in my experience arrangements like this never end well.  I do not believe that you should ever co-sign for friends/family, unless you can and are willing to fully take over the payments.  If you really want to own this house, consider doing a ligitamate purchase transaction.  Agree on a fair market price (that does not exceed a current appraisal), use a reputable closing agent or attorney.  Then maybe let your friend rent a room from you (with a lease agmt).  I also would not consider any lease w/option to purchase; this could cause you problems down the line.  Good Luck

Answer 3

Do yourself a favour - try a search anywhere on the internet for "co-sign with a friend" and read the results looking for a good news story.

Likely you will go blind before you find one.

What part of co-sign for a debt do people not understand?

Answer 4

Bad idea, but lets add another reason as to why above all the obvious. Has own business, and that business is not doing well. Most likely took out a loan in addition to mortgage putting house up as collateral. You might end up with a house, but also one with a lien on that you would also be responsible for, in other words he is off scot free and you are left holding all the debt. Not a good idea

Answer 5

Don't do it.  It will ruin your friendship and you'll be buying a home that is plummeting in value.

Answer 6

If you want the house, buy it from him.  You can't take over the mortgage since its in his name.  If you co-sign this will likely end very badly.  If he can't pay it will hurt your credit, you still can't take the place from him (you are on the loan but not the deed - without being on the deed the place stays his no matter what), and you will have a huge loan weighing down your own credit (since you would be responsible for this loan if he stopped paying) so you can't afford a new palce on your own.

So, just stay away from this.  Its a terrible deal for you and no chance or you getting the house (short of him deeding it to you, or selling it to you).