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Cosigning a mortgage is asking for trouble
By Edith Lank | Columnist
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Published: 9/5/2009 10:53 PM

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Q. I'm looking at going into a loan as the "co-borrower." What does this mean in terms of my legal claim to the property when we decide to sell?

A. Not a thing.

Taking on personal responsibility for the whole debt doesn't give you any part of the ownership. All it gives you is risk. In most cases, you won't do anyone a favor by helping them get in over the heads. If you're asked to cosign a note, think twice. You'll be putting your credit rating on the line, and dependent upon people whom the lender doesn't consider capable of handling the payments on their own.

Q. My son is a first-time homebuyer and I am cosigning for him to qualify for a mortgage. Does he still qualify for the $8,000 tax credit if I'm cosigning on the mortgage for him?

A. Again, the mortgage is a separate matter from the title, the ownership. Your son should receive a tax credit if he meets the requirements - hasn't owned a house in the last three years, closes before Dec. 1, reports income less than $95,000 ($170,000 if he's married).

But remember that you're taking on personal liability for the full amount of the mortgage. It will be listed as your debt on your credit record, and any problems with monthly payments would show up there, too.

Q. How important is a formal dining room to reselling value?

A. That depends on a lot of factors. For instance: is a dining room usual in that neighborhood, is the house suitable for a large family or a single person, is the architecture Victorian or midcentury modern? Also important are price levels and buyer expectations for that particular street.

If you're considering a specific change in your home, call nearby real estate brokerages and ask for some free advice. Local agents can judge better than I can.

Q. I am buying a bank-owned condo and was set to close next Friday. Contract, down payment, financing, seller contingencies, inspections, appraisals, etc., were all in place and complete.

The title company just ran the title search today and relayed to my agent and attorney that the title has a "cloud" on it. Apparently there is a different unit either next door or behind my unit on the other street that is in foreclosure, and they had a clerical mistake and used my property's legal description in their foreclosure proceedings, which places liens on my property.

Have you seen this before? Is there anything I can do to speed this process up and make sure they're doing what they should be doing in my interest?

A. Making sure things are done in your interest is the reason you've hired a lawyer. That's your attorney's job.

Of course you're impatient to close, but it's lucky the title company caught the error. You certainly don't want to buy legal complications. Your lender won't give you the money anyhow, until they're sure the property isn't burdened with other claims. You'll just have to be patient and let the legal process wind its way to clear the cloud from the title.

If, on the other hand, you need to close promptly, see if your lawyer's intervention can help expedite the process.

Q. I bought my condo seven years ago when I was single. Now that I'm married with two kids, I need to find a bigger place.

If I purchase a new place with my husband (who has never purchased any real estate before), can we get the federal tax credit?

A. That $8,000 tax credit is a great deal, and unlike last year's $7,000 credit, never has to be repaid. If it turns out you don't owe $8,000 to the IRS for 2009, they'll even send a check to you for the difference.

To qualify, though, you cannot have owned a house within the past three years, and you cannot be married to anyone who has. Sorry about that.

Q. I am looking at becoming a first-time real estate investor. A friend of mine, who is a mortgage loan officer, told me to report the first home as owner-occupied to get a better rate. I have no intention of living there. Are there any legal implications on this action?

A. Here's one just for starters: Lying to a federally chartered bank is a felony. Mortgage loan officers like your "friend" had a lot to do with getting us all in the current economic mess.

• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (please include a stamped return envelope), or readers may e-mail ehlank@aol.com.

2009, Creators Syndicate Inc.