Co-buying, Co-purchasing, or Co-signing to Obtain a Mortgage and the Risks
There is a new relatively unheard of method of obtaining a mortgage which is intended for people with less than ideal credit or those who are first time home buyers. It is called co-buying. It is a name which is also synonymous with co-purchasing or co-signing. It has yet to gain major attention in the United States, but it has been rearing its ugly head in the UK and in Australia.
The basic concept behind co-buying is that you find someone to help you obtain your mortgage by being a co-signer and co-purchaser on your mortgage. This person is your “mortgage buddy”, who takes over part of the financial responsibility of your mortgage thus making you less of a risk for a lender. For a first time buyer this would appear to be an excellent way to get into real estate as fast as possible.
For many first time buyers the current economy and world housing market makes this kind of setup more inviting than ever. High home prices are making it difficult for a first time homeowner to get the loan that would cover the cost of a first home.
For example: if the cheapest starter homes are $170,000 and most first time home buyers qualify for a $120,000 loan a problem obviously arrises.
With a problem like this facing today’s home buyers a few websites have already risen to try and fill their needs, and have created “co-buyer networks”. In essence sites where you can link up with other people like yourself who want to share the risk and burden of homeownership with someone else. In most cases these people can be complete strangers.
A few examples of these types of sites are:
Stepping out on a limb with a friend in order to purchase something jointly is risky enough. Mixing financial interests with your friends is one of the best ways to ruin a relationship, and one of the best ways to ruin your finances is by trusting them to a complete stranger.
Be leery of these sites and of co-buyer networks. As great of an idea as a “mortgage buddy” is the risks for being left high and dry with a large financial debt over your head are great. If you are willing to trust a complete stranger in order to obtain real estate at least also be willing to get the legalities worked out and make sure that your protect yourself heavily. Insure yourself, and get your deal written down on paper.
Don’t ever be tempted into something risky by your rush to own a home, and be suspicious of things which seem to good to be true.
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