Your Kid Wants to Buy a House. Should You Co-Sign?

Your kid comes to you and says "I found the perfect place, but I can't qualify on my own. Will you co-sign?"

Your first instinct is probably "Of course, I'll help."

But before you sign anything, let's talk about what co-signing actually means and whether it's the smartest way to help.

What co-signing really is:

When you co-sign, you're not just "helping them qualify." You're legally responsible for the entire mortgage if they can't pay.

That means:

• It shows up on YOUR credit report

• It counts against YOUR borrowing capacity

• If they miss payments, it affects YOUR credit

• If they default, YOU'RE on the hook

Real scenario we see:

Parents co-sign for their daughter's $450,000 mortgage. She's making payments fine.

Two years later, parents want to downsize and buy a condo. But they can't qualify for THEIR OWN mortgage because that $450,000 is counted against them.

They're stuck in a house they want to leave because they co-signed.

Another real scenario:

Parent co-signs for son's mortgage. Son loses his job during COVID, can't make payments for 6 months. Parent's credit score drops 120 points. Parent was about to refinance their own home for a renovation. Now they can't qualify.

So should you never co-sign?

Not necessarily. But let's look at ALL the options first.

Option 1: Gift the down payment instead

If you've got savings or investments, gifting your kid a down payment might be smarter than co-signing.

Pros:

• They qualify on their own income

• No ongoing obligation for you

• Clean transaction

Cons:

• Requires liquid capital

• Potential tax implications if withdrawing from investments

Option 2: Use a HELOC to lend them money

You borrow against your home equity and lend them the down payment.

Pros:

• They qualify on their own

• You can set up a repayment plan together

• Interest might be tax-deductible for you

• Keeps your borrowing capacity free

Cons:

• You're paying interest monthly

• Requires your home having available equity

Option 3: Reverse mortgage (if you're 55+)

Access equity from your home without monthly payments to help them with down payment.

Pros:

• No monthly payments required

• You stay in your home

• They qualify independently

Cons:

• Interest accumulates over time

• Reduces your estate value

• Specific age and equity requirements

Option 4: Strategic co-signing with an exit plan

If co-signing is the only option, set up a plan for getting OFF the mortgage within 2-3 years as their income grows.

What this looks like:

• Co-sign initially to help them qualify

• They work on increasing income and building equity

• After 2 years, they refinance on their own

• You come off the mortgage

The conversation to have BEFORE you co-sign:

Sit down together and discuss:

• What happens if they lose their job?

• What's the plan for removing you from the mortgage?

• How will this affect your own financial goals?

• Are they ready for homeownership financially and mentally?

• What's the backup plan if things go sideways?

What we'll do for you:

If your kid needs help buying and you're considering co-signing, call us first. We'll:

• Look at whether they can qualify with a smaller down payment instead

• Explore if a different property price makes more sense

• Show you exactly how co-signing affects your own finances

• Present all the alternatives with real numbers

• Help you structure an exit plan if co-signing is the route you choose

Real example:

Parents were ready to co-sign for their daughter. We looked at the numbers and realized if she:

• Bought a $420,000 condo instead of a $480,000 one

• Used an FHA program for first-time buyers

• Got her tax return from her accountant showing bonuses

She qualified on her own. No co-signing needed. She was thrilled to not have her parents on the hook, and they could move forward with their own plans.

Bottom line:

Helping your kids is beautiful. But do it in a way that protects everyone.

Co-signing isn't bad, but it's also not the only option. Let's look at the full picture together and find the strategy that works best for your family.

Our advice is free, and we've helped hundreds of families navigate this exact situation.