Co-signing a Loan: How It Affects Your Mortgage Chances

You co-signed for a friend's car or a family member's apartment. Nice of you. But that loan shows up on your credit report, and the lender counts it as your debt.

How lenders treat co-signed loans

Full payment counts in your DTI. Every month. Even if the other person always pays on time. The lender doesn't care who makes the payment — they see it as your obligation.

What you can do

• Get a payment history letter — If the co-signed loan has 12+ months of on-time payments made by the other person, some lenders will exclude it from your DTI. Ask your loan officer.
• Get released from the loan — Some lenders allow co-signer release after a certain number of on-time payments. If you're close, request it.
• The other person refinances — If they can qualify on their own, they can refinance the loan into their name only.
• Pay it off — If it's a small loan and you have the cash, just get rid of it.

The danger zone

A $400/month car loan you co-signed might not break the bank. But if you've co-signed for multiple things (car, student loans, apartment), those monthly payments stack up fast and can easily push your DTI over the limit.

Bottom line: Before you apply for a mortgage, look at every co-signed debt and plan how to handle it. Don't let a favor for someone else block your own home purchase.