Co-Signer vs Co-Borrower: What's the Difference for Mortgages?

A co-borrower shares ownership of the home and responsibility for the mortgage. A co-signer guarantees the loan without owning the property—they’re responsible if you don’t pay but have no ownership rights. Both help you qualify by adding income and credit to the application, but co-borrowers appear on the deed while co-signers do not. Choose based on whether you want shared ownership.

Co-Borrower vs Co-Signer Comparison

Key Differences

Factor	Co-Borrower	Co-Signer
On the deed	Yes	No
Ownership rights	Yes	No
Payment responsibility	Yes	Yes (if primary defaults)
Income counted	Yes	Yes
Credit checked	Yes	Yes
Occupancy	May or may not live there	Doesn’t live there
Equity share	Yes	No

Who They Are

Co-borrower: Equal partner in the loan and ownership. Often a spouse, partner or family member who will share the home or investment.

Co-signer: Guarantor only. Usually a parent or family member helping someone qualify who couldn’t alone.

How Co-Borrowers Work

Shared Ownership and Responsibility

Co-borrowers are full partners:

Both names on the loan
Both names on the deed
Both responsible for payments
Both build equity
Both affected by payment history

Types of Co-Borrowers

Occupying co-borrower: Lives in the property

Qualifies for primary residence rates
Often a spouse or partner

Non-occupying co-borrower: Doesn’t live in the property

Helps primary borrower qualify
Must meet lender requirements
Often a parent or family member

How Income and Credit Are Used

Income:

Both incomes combined for qualification
Helps meet DTI requirements

Credit:

Lender uses lowest middle score of both borrowers
Or average of middle scores (varies by lender)
Weaker credit can hurt the application

Co-Borrower Example

Marcus (son) and Robert (father) as co-borrowers:

Factor	Marcus	Robert	Combined
Income	$4,500/month	$7,000/month	$11,500/month
Credit score	680	750	680 used
Ownership	50%	50%	100%
Payment responsibility	100%	100%	Joint

Marcus couldn’t qualify alone but can with Robert’s income. Both own the home and both are responsible.

How Co-Signers Work

Guarantee Without Ownership

Co-signers promise to pay if the primary borrower doesn’t:

Not on the deed
No ownership rights
No equity share
Full payment responsibility if needed

When Lenders Allow Co-Signers

Not all loans allow non-occupying co-signers:

FHA: Allows non-occupying co-signers (some restrictions)
Conventional: Varies by program
VA: Limited co-signer options
USDA: Allows in some cases

How Co-Signer Helps

Income boost: Co-signer’s income helps meet DTI requirements

Credit boost: Co-signer’s credit can help qualify (if stronger than primary)

Co-Signer Example

Jennifer (daughter) buying with Lisa (mother) as co-signer:

Factor	Jennifer	Lisa	For Loan
Income	$5,000/month	$8,000/month	$13,000/month
Credit score	660	780	660 used
Ownership	100%	0%	100% Jennifer
On deed	Yes	No	Jennifer only
Payment responsibility	Primary	Backup	Both liable

Jennifer owns the home outright. Lisa guarantees the loan but has no ownership.

When to Use Each Option

Choose Co-Borrower When

Shared investment:

Both parties investing in the property
Both want equity and ownership
Buying with spouse or partner

Investment property:

Partners buying rental property together
Splitting equity and responsibility

Family purchase:

Parent helping child but wants stake
Multi-generational home purchase
Both parties will benefit from appreciation

Choose Co-Signer When

Temporary qualification help:

Primary borrower will eventually qualify alone
Building credit or income history
Co-signer wants no ownership stake

Parent helping child:

Parent doesn’t want ownership
Child should build equity alone
Simpler exit later

No investment intent:

Co-signer is purely helping
Doesn’t want legal ownership complications
Estate planning considerations

Risks and Considerations

Risks for Co-Borrowers

Shared liability: If one co-borrower stops paying, the other is 100% responsible

Credit impact: Late payments hurt both credit reports

Relationship complications: Disputes over the property require legal resolution

Exit difficulties: Removing a co-borrower requires refinancing

Risks for Co-Signers

Full liability, no ownership: Responsible for debt without owning the asset

Credit impact: Debt counts on co-signer’s credit report Late payments damage co-signer’s credit

DTI impact: Loan counts against co-signer’s DTI May affect their ability to borrow

No control: Can’t force sale or refinance Can’t make decisions about property

Protecting Yourself as Co-Signer

Set expectations:

Clear agreement on who pays
Communication plan for problems
Exit strategy

Monitor payments:

Set up alerts for missed payments
Access to loan account
Regular check-ins

Time limit:

Plan for refinance to remove co-signer
Specific timeline (2-3 years)
Credit and income goals

Removing Co-Borrowers or Co-Signers

Removing a Co-Borrower

Refinancing required:

Remaining borrower must qualify alone
New loan in single name
Closing costs apply

Quitclaim deed alone isn’t enough:

Removes from title
Does NOT remove from loan
Original borrower still liable

Removing a Co-Signer

Same process:

Refinance to remove co-signer
Primary borrower must qualify alone
Co-signer released from liability

Some lenders offer:

Co-signer release after payment history
Typically 12-24 months of on-time payments
Primary borrower must qualify alone

When Removal Is Difficult

If primary borrower can’t qualify alone:

Must wait until they can
Or sell the property
Or find replacement co-borrower/signer

Credit Score Considerations

How Multiple Borrowers Affect Rate

Conventional loans: Typically use the lower of the two middle scores

FHA loans: Uses lower middle score when both borrowers are on the loan

Example Impact

Scenario	Scores	Score Used	Rate Impact
Solo (good)	750	750	Best rate
With co-borrower (lower)	750 + 650	650	Higher rate
With co-borrower (equal)	750 + 740	740	Good rate

Sometimes adding someone hurts: If their credit is lower, it can increase your rate

Strategic Considerations

If your score is much higher:

Adding co-borrower may raise your rate
Weigh income benefit vs rate cost
Calculate total cost difference

If scores are similar:

Adding co-borrower has minimal rate impact
Focus on income and DTI benefits

Legal and Tax Implications

Ownership and Estate Planning

Co-borrowers:

Property passes per ownership agreement
May need survivorship designation
Estate planning should address

Co-signers:

No ownership to pass
No estate implications for property
Just debt obligation during life

Tax Deductions

Co-borrowers:

Both can potentially deduct mortgage interest
Based on actual payments made
Must itemize to benefit

Co-signers:

Generally cannot deduct interest
Unless making payments and have ownership interest
Complex—consult tax advisor

Divorce and Separation

Co-borrowers divorcing:

Property division required
Often requires sale or refinance
One party may buy out other

Co-signer when borrower divorces:

Co-signer’s obligation continues
Until loan is paid or refinanced
May be caught in middle

Alternatives to Co-Signers

Wait and Build Credit

If qualification is the issue:

Improve credit score
Increase income
Pay down debt
Try again in 6-12 months

Down Payment Assistance

If cash is the issue:

State and local programs
Grants and forgivable loans
Gift funds from family

FHA Loan

More lenient requirements:

580 credit (3.5% down)
Higher DTI allowed
May qualify without co-signer

Different Property

Lower price means:

Smaller loan needed
Easier to qualify
Less risk for everyone

Frequently Asked Questions

Can a co-signer be on the deed?

Yes, but then they’d be a co-borrower, not a co-signer. The distinction is specifically about ownership—co-signers guarantee without owning.

Does co-signing affect the co-signer’s credit?

Yes. The loan appears on the co-signer’s credit report. Late payments damage their credit. The debt counts in their DTI.

Can I remove a co-signer later?

Yes, through refinancing. Some lenders offer co-signer release programs after 12-24 months of on-time payments if the primary borrower qualifies alone.

What happens if the primary borrower stops paying?

The co-signer or co-borrower becomes responsible. The lender will pursue both parties. Both credit reports are affected by late payments.

Is it better to have a co-borrower or co-signer?

Depends on goals. Co-borrower if you want shared ownership. Co-signer if you want solo ownership but need help qualifying.

Can parents co-sign for their adult child?

Yes, this is common. Parents should understand the risks: full liability, credit impact and potential relationship strain if problems arise.

Does the co-signer need good credit?

Ideally, yes. The purpose is often to strengthen the application. However, even a co-signer with moderate credit can help by adding income.