Will being a guarantor affect my ability to get a mortgage?
Lenders will note your responsibility as a lease guarantor if it shows up in your financial documentation.
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I’m going to be a guarantor for my daughter’s lease. I’m also looking to buy. Will it affect my ability to get a mortgage?
Taking on the responsibility for your daughter's rental lease could possibly factor into a mortgage broker's calculations, our experts say.
Signing on to be a lease guarantor means that you are responsible for her rent payments if your daughter becomes unable to pay. Lenders will note this responsibility if it shows up in your financial documentation.
"Banks and lenders look at your overall debt-to-income ratio, and they will consider that you may be fully responsible for the payments that you guarantee," says Deanna Kory, a broker at Corcoran. "So they will take those payments into consideration when evaluating whether to give you a mortgage. It is best to speak with a mortgage lender about this prior to giving your daughter a guarantee."
Note that your debt-to-income ratio is your monthly debt payments divided by your gross monthly income; for most lenders, the "ideal" debt-to-income ratio is no more than 36 percent.
If you're on the hook for your daughter's rental lease, that would be considered a potential liability by a mortgage broker.
"It could affect getting a mortgage in some fashion if you were a co-signer on your daughter’s lease, as that could be public information and would show you are involved with that additional liability," says Jeffrey Geller, founder of Insurent (a Brick sponsor).
He notes that one way to avoid hurting your chances of getting a mortgage would be to use an institutional guarantor like Insurent to guarantee your daughter's lease, which would mean you would not be named on the lease, but only a signatory on Insurent's agreement.
If you do sign on as guarantor but can prove that your daughter has consistently pays her rent, you should be in the clear.
"Banks will ask for a 12-month rent history, or if it's a new lease, a six-month history. If you can show your daughter has been making payments, they'll exclude it from consideration," says Melissa Cohn, regional vice president of William Raveis Mortgage.
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