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What you’ll learn
— The difference between a cosigner and a guarantor on a mortgage or lease
— How each role affects repayment responsibility and your credit report
— When lenders or landlords may ask for cosigners and guarantors
— How to decide which one suits your goals, and ways to move forward if you don’t have one
Getting approved for a mortgage or rental lease on your own can pose a challenge for some people. Maybe your income is steady, but your credit score has suffered in recent years. Or perhaps you’re early in your career and don’t have an extensive credit history.
That’s when someone close to you — a parent, partner, or longtime friend — might step in and support your application as a cosigner or guarantor. Each role can help you move ahead with your plans, though they have different responsibilities and liabilities to keep in mind.
This guide explains the differences between a cosigner versus a guarantor, how both roles work, and what they may mean for your future housing plans.
Is a cosigner the same as a guarantor? Differences at a glance 🔍
A cosigner is a full partner on the loan, and a guarantor is a backup only if necessary. They both reduce the risk of financial loss for lenders, providing reassurance that the debt will be paid. Here’s a summary of their main distinctions:
| Aspect | Cosigner | Guarantor |
|---|---|---|
| Responsibility starts | Immediately responsible for missed monthly payments | Only after the borrower defaults, which is usually after 90+ days of missed payments |
| Liability | Shared with the borrower from the beginning | Backup, triggered after the borrower defaults |
| Credit report | Appears on the cosigner’s credit report; can be affected by missed payments | Typically doesn’t appear on credit report unless the borrower defaults |
| Lease occupancy | May have rights to occupy the property | No right to occupy the property |
Basically, a cosigner is like a partner in a row boat who’s ready to tag in whenever your strength or pace slips. A guarantor, on the other hand, is like an on-call rescue team if your boat sinks.
What’s a cosigner?
A cosigner applies for the loan alongside you and agrees to cover the debt if you fail to pay what you owe. They’re responsible for missed payments and take responsibility if you default on the loan. The cosigner’s income, debts, and credit history are part of the same application, and the lender sees both of you as borrowers.
Having a cosigner helps borrowers get approved for a loan, increase the amount they qualify for, and secure a lower interest rate. For cosigners, it means taking on a serious financial obligation. The mortgage or lease shows up on their credit report, and every payment — whether on time or missed — affects their score as much as yours.
Keep in mind that a cosigner is distinct from a co-applicant. These borrowers are considered one of the primary owners, appear on the property title, and have the same ownership rights as the initial applicant.
What’s a guarantor?
A guarantor agrees to cover the mortgage or rent if the primary borrower completely defaults, usually defined by going 90+ days without making payments. They’re responsible for payments once the lender can’t collect anything further from the primary borrower.
A guarantor’s promise is known as a guarantee. It reassures the lender that if the borrower doesn’t hold up their end of the agreement, the guarantor will pay the monthly costs. That security can help a borrower with weaker credit or a higher debt-to-income ratio qualify for a loan or lease they wouldn’t be able to get on their own.
When do lenders or landlords request a cosigner or a guarantor?
A lender or landlord may want to add a cosigner or guarantor if they believe a borrower is a financial risk, which can happen during rental and mortgage applications. Here are a few common scenarios:
— When the applicant has little to no credit history, such as recent graduates or new arrivals to the U.S.
— If the borrower has a lower credit score, such as from previous late payments or eviction
— If the borrower has a limited or inconsistent income that doesn’t meet lender or landlord requirements
— If the buyer’s living situation is about to change due to job switches or added expenses
Lenders outline their key requirements in advance, so borrowers will know early on if they’ll need a cosigner or guarantor. Ask your mortgage provider about their qualification criteria to see where your financial profile fits in.Â
Choosing between a cosigner and a guarantorÂ
Your choice depends on your needs and preferences.
A cosigner could be a better fit if you’re looking to qualify for a larger mortgage or better interest rates. Their income and credit are coupled with yours, which can increase your borrowing power.
If you have enough cash for a down payment but your credit keeps you from qualifying, a guarantor might be enough to help. They let the lender know that someone with stronger finances can handle the payments in case you’re unable to keep up.
When you talk with family or friends about helping with your loan, be up front about what the arrangement will involve. Everyone should understand the arrangement, from the potential credit impact to the duration of their role.
Before you commit, it’s worth running the numbers. Start by using Better’s monthly mortgage payment calculator to understand what your payments could look like. Consider your estimates, and if a cosigner or guarantor feels right, reach out and talk to our experts. Better can guide you through each arrangement quickly and confidently.
...in as little as 3 minutes – no credit impact
Risks and benefits of cosigning
Cosigners can open doors for borrowers — be it for larger loan amounts, better interest rates, or approvals on homes that would have never happened otherwise. The potential risk is that the loan appears on the cosigner’s credit report. That means any missed payments can affect their score and make it more difficult to qualify for future credit if the primary borrower defaults.
However, cosigning can be a positive experience. It’s a great way to help younger family members or friends build credit and afford a home they love.
Risks and benefits of a guarantor arrangement
Having a guarantor has powerful benefits for borrowers — it can mean the difference between getting a mortgage or having to delay the purchase.
The guarantor takes on a large amount of risk in this arrangement. If the buyer defaults, the guarantor is legally responsible for paying the outstanding debt.
Similar to cosigning, being a guarantor is a great way to help friends and family. Taking out a loan is a significant milestone, and many people feel accomplished supporting the journey.
Alternatives to having a cosigner or a guarantor
If no one can cosign or act as a guarantor, there are still ways to secure a loan. Here are a few alternatives:
— Focus on improving your credit score by paying down debts and keeping current on all accounts.
— Save for a larger down payment, which reduces the loan amount and improves chances of approval.
— Look for homes in a different price range or neighborhood where monthly payments work better within your budget.
— Explore loan programs that support first-time home buyers or borrowers with limited credit history, like FHA loans or VA loans.
Find the right option for your homebuying plans
A cosigner and a guarantor can help you achieve homeownership in different ways. The right choice depends on what your finances look like and who you feel comfortable bringing into the process. If you want a little help managing the process, ask Better.
Better offers a smooth path to homeownership. We help borrowers from every background explore their options, whether they’re interested in a cosigner or they’re going at it solo. Apply online in minutes, and start talking to one of our experts to find a mortgage that feels right. To cut your price further, partner with a Better Real Estate Agent and save $2,000 on your Better Mortgage.
Unlock lower rates and discover your ideal mortgage with Better.
...in as little as 3 minutes – no credit impact
FAQ
Do guarantors sign the lease?
Yes, guarantors often sign the lease, but it depends on the lender or landlord’s requirements. However, a guarantor almost always signs a separate agreement that confirms their financial obligation if the tenant or borrower can’t make the payments.
Is a guarantor a cosigner?
No, a cosigner applies for the loan with the borrower and shares monthly payment responsibility from day one. A guarantor is only responsible if the borrower defaults on the loan.Â
Does being a guarantor affect credit score?
It can. When the borrower pays on time, the guarantor’s credit report likely won’t change. But if the buyer misses payments, it can impact the guarantor’s score.
Does a guarantor need good credit?
Yes, generally a guarantor needs good credit because the lender relies on their finances if the borrower can’t make payments. They typically also need a sufficient, stable income.