More home buyers have co-signers on their mortgage loans in order to help defray the rising costs of real estate, according to a new report released by real estate data firm ATTOM Data Solutions. In the second quarter of this year, 22.8 percent of mortgage applications involved a co-borrower, up from 20.5 percent a year earlier, the report shows.
Dozens of programs and private companies are emerging to act as co-borrowers for consumers by offering a down payment in return for a share of equity in the home, MarketWatch reports. Family members who help with a down payment may also be considered co-borrowers. Buyers who have a co-borrower tend to buy smaller but more expensive homes, according to ATTOM Data Solutions’ analysis. They also tend to have lower interest rates and put more money down on the home, which helps avoid the need for mortgage insurance.
“My takeaway is that co-borrowers are buying in more expensive markets but are having to put more down to compete in those markets,” says ATTOM Data Solutions vice president Daren Blomquist. “The more money down, along with a co-signer who may have better credit, is helping these co-borrowers secure a lower interest rate. But the homes they are buying tend to be smaller—an indication these skew toward first-time home buyers.”
Source: “‘Co-Borrowing’ to Afford a Home Is Gaining Popularity. Who’s Doing It and Why?” MarketWatch (Sept. 8, 2017)
