Ask Andy: Loan co-signers - WMC Action News 5 - Memphis, Tennessee

Reported by Andy Wise

Ask Andy: Loan co-signers

I truly feel the pain of parents who have co-signed loans for their kids. 

You want to help your grown babies get a head-start on a home loan, car loan, whatever.  But they make mistakes.  Mistakes lead to bad credit.  Toss in an ailing economy, and the loans go bad, along with Mom and Dad's credit since they're co-signers.

"Jill," a mom in North Memphis, is wishing right about now that she never co-signed a mortgage for her daughter.

"I co-signed for my daughter a house. In writing she promised to improve her credit score in three years and have my name removed from all paper work. This did not happen. What exactly can I do to free my name?"

Jill, you are in for a long-haul because as long as you have better credit than your daughter, you're going to own that loan unless your daughter can refinance the loan in her name only.

Sam Goff, loan officer and director of marketing for Evolve Mortgage in Cordova, TN (www.evolvemortgage.com), says if Jill's daughter still has a low credit score, the lender will not release her mom as the co-signer.  Think of Jill's good credit as the collateral for that loan.  It's the only guarantee the loan will be paid unless and until Jill's daughter can prove she can make the payments and improve her score.

Some folks may ask why not have Jill quit-claim the house to the daughter? A quit claim would remove the mom's name from the deed or title, but not the loan.  Jill would still be responsible for the loan.

I think it's time Jill had a real heart-to-heart with her daughter.  Her daughter has to take responsibility, or Jill might have to do something she doesn't really want to do.  Jill might have to refinance the loan in HER name.

She would protect her credit score that way by eliminating the dead weight of her daughter, but then she'd have another home loan to pay off.

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