Similarities and Differences Between Co-Borrowers and Cosigners

You may have heard the terms co-borrower and cosigner in connection with your FHA loan process, but aren't sure about the distinction. Both a co-borrower and a cosigner can help a primary borrower qualify for a mortgage, but they have different roles and responsibilities.

What Is a Co-Borrower?

A co-borrower is someone who is listed on the mortgage loan application alongside the primary borrower. They share equal responsibility for repaying the loan and are typically co-owners of the property being financed. During the loan application process they're required to by provide their income details, credit history, and other financial information to help meet the lender's qualification requirements.

Co-borrowers have a legal stake in the property and may have their names on the title and the mortgage documents. FHA loans allow for co-borrowers, including spouses or family members, to combine their incomes and credit profiles to qualify for a larger loan amount or to meet the lender's requirements.

What is a Cosigner?

A cosigner is not typically listed on the mortgage application but can be used in some cases to help the primary borrower qualify for an FHA loan. They're primary role is to provide additional assurance to the lender that the loan will be repaid, and do this by agreeing to assume responsibility for the loan if the primary borrower defaults.

Unlike co-borrowers, cosigners do not have a legal stake in the property being purchased. They don't own or have any rights to the property.

FHA loans are primarily underwritten based on the creditworthiness and financial situation of the primary borrower. In most cases, FHA loans require the borrower to meet the qualifications without the use of a cosigner.

The Bottom Line

The key difference is that a co-borrower is directly involved in the mortgage application, shares equal responsibility for the loan, and has a legal stake in the property, while a cosigner is not directly listed on the application, does not have ownership rights in the property, and provides additional assurance to the lender without being financially involved to the same extent as a co-borrower.

FHA loans are more commonly associated with co-borrowers rather than cosigners, but lending guidelines can vary if a family member is involved. Check with the specific lender for their policies regarding co-borrowers and cosigners on FHA loans.