How Old Do You Have to Be to Buy a House With a Co-signer?

For many individuals, homeownership is a significant achievement. Younger individuals often face financial and legal hurdles when entering the housing market. For those with limited financial history, a co-signer can be essential, facilitating access to mortgage financing and bridging the gap to homeownership.

Understanding the Legal Age for Homeownership

To engage in a real estate transaction, an individual must possess the legal capacity to enter into binding contracts. In most states, this legal age, known as the age of majority, is 18 years old, allowing individuals to legally sign purchase agreements and mortgage contracts. A few states have different requirements, such as 19 or 21 years of age.

Before reaching the age of majority, a minor generally cannot sign a contract for a home or a loan, as such agreements are typically voidable by the minor. Even if a minor’s name is on a property title, they cannot execute transactions involving the property until they reach legal age. Therefore, the ability to independently purchase a home and secure financing is tied directly to meeting the age of majority in the state where the property is located.

The Purpose of a Co-signer for Younger Buyers

Younger prospective homeowners often encounter financial hurdles that make independent mortgage qualification challenging. A common issue is a limited or non-existent credit history, which lenders use to assess a borrower’s reliability in repaying debt. This can lead to loan denials or less favorable terms.

Income stability also presents a common challenge for younger individuals. Lenders prefer consistent employment and a predictable income stream, typically requiring two years of employment history. Additionally, a higher debt-to-income (DTI) ratio, potentially from student loans or other forms of debt, can further impede qualification.

A co-signer helps mitigate these financial challenges by adding their stronger financial profile to the mortgage application. The co-signer’s established credit history, stable income, and potentially lower DTI ratio can significantly improve the overall financial picture presented to the lender. This arrangement makes the loan application more appealing, increasing the likelihood of approval for the primary borrower.

Lender Qualifications and the Co-signer’s Impact

Lenders evaluate several factors beyond age when assessing a mortgage application, including credit score, income, employment history, and debt-to-income (DTI) ratio. A co-signer’s financial standing can directly address deficiencies in the primary borrower’s profile across these areas. The co-signer agrees to take on equal legal responsibility for the loan, obligated to make payments if the primary borrower defaults.

For instance, a conventional loan generally requires a minimum credit score around 620. Government-backed loans, like Federal Housing Administration (FHA) loans, may have lower requirements, sometimes accepting scores as low as 500 with a larger down payment, or 580 with a minimum 3.5% down payment. If the primary borrower’s credit score falls below these thresholds, a co-signer with a strong credit history can help meet the minimum requirements, though the lender typically considers the lower of the two credit scores for qualification and interest rate determination.

Lenders also scrutinize income and employment stability. They typically require verification of steady income and prefer a history of consistent employment, often two years, to ensure the borrower’s ability to make ongoing payments. If a younger borrower has a short employment history or income that does not independently meet the lender’s requirements, the co-signer’s verifiable income and stable employment history can contribute to meeting these criteria.

The debt-to-income (DTI) ratio is another important metric, comparing total monthly debt payments to gross monthly income. Lenders generally prefer a DTI ratio of 36% or lower, though some may approve loans with a DTI up to 43% for conventional loans, or even 50% for FHA loans with compensating factors. A co-signer’s income can effectively lower the combined DTI ratio, making the application more favorable, even if the co-signer does not reside in the home.