I agree with what some of the others have suggested. Absolutely do not cosign the loan. It’s the worst of both worlds for both of you. If he cannot get the loan himself, I would suggest buying the house yourself with full title and loan in your name. Then put together a lease-purchase agreement with your relative with the full $40,000 down payment. He becomes responsible for all upkeep, maintenance and improvements. To make it easy, you could even make your loan terms with him identical to your mortgage and insurance costs. You have great options in this case if he defaults.
Essentially, you are unlikely to be underwater with this arrangement even if he quits making payments for a while. Make the terms of default or sale extremely clear. I would do the following: In the sale of the house, you pay your mortgage and insurance cost off first, anything you’ve carried because he’s been late on his payments second, he gets his down payment third, and you get any profit from the sale. Because you are taking on the risk, you should get the profit. If he at any point wants to purchase and get his own mortgage, he can do it at cost.
This protects both of you, favors the one who takes the risk, and provides a clear exit strategy. In today’s world finances are private enough that your relative could quickly rack up credit card debt, etc and leave you unprotected. This also encourages him to move as quickly as he can to secure his own mortgage so that he protects his profit potential.