• Think carefully before agreeing to co-sign a friend's mortgage.house image by Michael Shake from Fotolia.com
  
  As much as you may want to help a close friend or relative move into his dream home, becoming a co-signer on a loan is not a decision to take lightly. The Indiana Department of Financial Institutions reports that 75 percent of co-signed loans that go into default are repaid by the co-signers. If you are planning to co-sign on someone's loan, make sure to prepare for this scenario by knowing your rights and understanding the lender's contract.
  
  

Application Process

• The co-signer must provide much of the same information as the homeowner, including personal information about income, liabilities and credit history. The co-signer's financial history will impact the approval or rejection of the loan as much as the history of the home buyer. The co-signer must also sign all loan documents except the security instruments.
  
  

Relation to Buyer

• The co-signer must not have a financial investment in the home. Examples of such a person would be a real estate agent, builder or seller. The exception to this is if such a person is a blood relative of the home buyer.
  
  

Eligibility

• According to the Federal Housing Administration, the co-signer must have a principal residence in the U.S. unless they are on active military duty or living abroad as a U.S. citizen. The co-signer must also be of the state's legal age for signing a mortgage.
  
  

Warnings

• If you have co-signed a loan that a homeowner is unable to repay, some mortgage companies may ask you to repay it before contacting the homeowner himself. These companies can sue or garnish your wages, and a situation like this can have a negative effect on your credit score, making it difficult for you to borrow from other lenders. Another option is to co-sign for part of the loan, an option that some mortgage companies are willing to consider.