What does co-applicant mean? Co-applicant vs co-signer

What it is

The federal credit rule, Regulation B, does not use the word co-applicant. It uses joint applicant, and its commentary defines it as someone who applies contemporaneously with the applicant for shared or joint credit.

The CFPB's mortgage glossary uses another word for the same role: a co-borrower, someone who agrees to take full responsibility to pay back a mortgage loan. So the terms overlap, and lenders each use their own.

Co-applicant vs co-signer

Regulation B treats a joint applicant differently from a cosigner. The OCC's glossary describes a cosigner as an individual who signs the note of another person as support for the credit of the primary signer. A cosigner is asked to sign because the main applicant needs more support. A joint applicant applies for the credit too.

The rule also protects you. A creditor cannot require your spouse's signature if you qualify on your own, and cannot require a cosigner from an applicant who is creditworthy alone. A creditor may ask for a cosigner, guarantor or similar party if more personal liability is needed, but cannot require that it be your spouse.

Applying as a couple

Applying together means both of you are responsible for the whole debt, since the CFPB says a co-borrower is obligated for the full loan. It is worth deciding in advance how you will split the payment, using something like a split by income.

Two incomes on one application

• Her monthly income: $4,200. His: $2,600
• Combined: $4,200 + $2,600 = $6,800
• Monthly payment on the shared loan: $1,900
• Split by income: her share is $4,200 / $6,800 = about 62%, or $1,174
• His share is about 38%, or $726. The lender can still ask either of you for the full $1,900.