QUESTION
What would be the risks if I co-sign on purchasing a house?
Asked on Jul 30th, 2012 on Bankruptcy - California
More details to this question:
We live in California and we own our home. Our son and daughter-in-law would like us to co-sign on a house they would like to purchase in California. I want to know more about the liabilities as co-signers. Our son has told us that if we sign, only our credit rating will be at risk. If in the future for any reason my son and my daughter-in-law cannot pay their mortgage, or default on their loan, or go into bankruptcy, then we wanted to know the following: 1. Is there a chance that their lender could either seize our home, our savings or any of our other assets to pay off our children's mortgage?2. Could a court take possession of our wages to either make payments or to pay off our children's mortgage loan? 3. If only one of us co signs, is our community property at risk 4. If only one of us co signs, is the credit score at risk for the spouse who did not co sign?
2 ANSWERS
The answer to all 4 of your questions is NO.
To question 3, the answer is still no, but it actually doesn't matter if you both sign, your community property is still not at risk.
California law does not allow a home lender to enforce the debt as a personal liability.
All the home lender can do is foreclose on the home and report that the borrowers have defaulted on their payments. Ever. No matter what.
There are no deficiency judgments for home mortgages in California. These rules do not apply to second mortgages, but you did not ask about those.
Answered on Aug 20th, 2012 at 5:46 PM
Criminal Law Attorney serving Fremont, CA
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If this is a purchase money mortgage, no prior mortgages, they should only go against the property if there is a default. The only other problem could be if there is a short sale, not full loan amount. It is possible that your credit will be hurt if there are late payments. This could affect your credit score. This is really a family issue do you trust them? What happens if one is disabled or hired.
Answered on Aug 20th, 2012 at 1:50 PM