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I'm a college student right now with no income. My family is supporting me and paying all of my bills at the moment. A few years ago my mother and I needed to move around the same time, so we moved into a house together. We've been renting the house, but we've recently been approached by the owner and asked if we'd like to purchase it. Now, in my mind, this is her house, so I intend to move out eventually. After consulting with our banker and accountant, they both suggested that it would put us both in a preferable estate and tax position if I were to be a secondary signer of the mortgage and a co-owner on the deed.

I understand that there are many risks and intricacies of such a situation, but my question is this: what effect will being a secondary signer on this mortgage have on my ability to obtain credit in the future? As I have no income, I currently only have secured credit products which have given me an excellent credit score. However, will this mortgage prevent me from obtaining unsecured credit or other mortgages down the line when I do have a job and decide to move out? My fear is that this mortgage will push my debt to income ratio too high.

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    Currently the estate tax exemption is over 5 million dollars and continues to increase. Are you anticipating that your mother's estate will exceed this? If not then this advice can be ignored. – Pete B. Mar 22 '17 at 12:15
  • @PeteB. I suspect they were referring to probate costs and not estate taxes. – D Stanley Mar 22 '17 at 13:46
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If you are a cosigner of the loan then you are 100% responsible for the loan.

So if in a few years you want a car loan, home loan or even a credit card the new lender will assume that you will have to make 100% of the mortgage payment each month. It won't matter if you are or aren't currently living in the house, you are locked into the monthly payment. There is also no way of getting out of that obligation short of selling the property or refinancing the mortgage in your mothers name only.

You could even run into an issue while trying to rent a place of your own. If they do a credit check, you will have a great score (if all the payments are on time) but the landlord may be concerned about your ability to make both payments.

Also remember that if you want to get out of the mortgage both parties will have to agree to sell or refinance, you can't do it alone. You also will need to decide now how the equity will be handled in the future, that way there won't be a disagreement regarding dividing any profits when the transactions are concluded.

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    +1 - Exactly. The Pros seem to have gotten this exactly wrong. sigh – JoeTaxpayer Mar 22 '17 at 12:57
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Being a co-owner could be advantageous to you when she passes, since the house will not have to go into probate, but there are other ways to solve that problem (e.g. have her write a will). In any case, you can be a co-owner without being a cosigner on the mortgage, which does not offer any benefit to you, only to the bank. I suspect that they either gave misleading advice or it was misunderstood.

Unless you are OK being completely responsible for the mortgage, I would not be a cosigner. If I were your mother, depending on your relationship I would also not make you a co-owner as it just complicates things, like when you go to sell the house. Talk to a qualified estate planner if you are concerned about probate or other estate taxes to see what the best options are.

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    "Talk to a qualified estate planner" - this member appears to be a magnet for pros who need to buy a clue. What makes you think the planner he finds won't be just as bad? – JoeTaxpayer Mar 22 '17 at 15:26
  • @JoeTaxpayer - while OP's advice pool hasn't been great so far, they should still be encouraged to find a qualified professional over just taking advice from strangers on the internet. – BobbyScon Mar 22 '17 at 15:31
  • A young man with no income has a mother ready to (maybe) buy a house. You really feel an estate planner (presumably an attorney) is the right direction? If so, he should go for it. – JoeTaxpayer Mar 22 '17 at 15:50
  • @JoeTaxpayer Fair enough, but my point is don't take estate planning advice from the bank that's trying to sell you a loan (I suspect this was a sly way to get him to cosign, which only benefits the bank). I agree that estate planning is probably not a concern, but there's not enough information in the question to determine that for certain. – D Stanley Mar 22 '17 at 16:02

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