Joint Mortgage: What To Know About Applying For A Home Loan Jointly
Sidney Richardson8-minute read
August 01, 2022
When attempting to get a mortgage to finance a home, all the options can be overwhelming. A joint mortgage can be a great option to consider, especially for first-time home buyers, because it allows you to split a loan with someone else.
This article will provide an overview of how a joint mortgage works and address factors to think about when considering this home buying option.
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What Is A Joint Mortgage Loan?
A joint mortgage is shared by multiple parties, typically a home buyer and their friend, partner or family member. Some people apply for a parent-child joint mortgages with their adult children. A joint mortgage allows two or more parties to pool their financial resources and potentially qualify for a bigger or better loan than they could have on their own.
Unlike joint ownership, which sees two parties sharing the legal ownership of a property equally, a joint mortgage has nothing to do with whose name is on the deed. With a joint mortgage, two parties are simply both responsible for the loan – even though one of them may not have their name on the actual title and doesn't technically own the property.
How Joint Mortgage Loans Work
When you buy a house with a joint mortgage, you share responsibility for the loan with another person. While joint mortgage applicants are often married, you don't have to be married to the other party on your loan – you just both have to qualify and be over the age of 18. The factors used to decide whether you qualify for the loan are pretty much the same as if you were applying for a mortgage yourself; your lender will look at borrower credit scores, income, debt, employment history, etc. All parties that will be on the loan have to submit their own mortgage application.
If you're approved, both you and the other party involved will sign a promissory note. You will both be equally responsible for making payments on the loan, though one of you can make the payments on behalf of the pair or group.
Be aware that if someone stops making their share of the payments, the lender can penalize and come after any of the borrowers for the money, since they are all equally responsible. That said, make sure whoever you decide to share a joint mortgage with is fully invested in repaying their share of the loan.
Whose Credit Score Is Used On A Joint Mortgage?
When you get a joint mortgage, your lender will look at the credit history and credit scores of all applicants that will be on the loan. Since everyone's credit will impact the loan you qualify for, it can be detrimental if you or the person you're applying with has a poor credit score.
If you or your co-borrower's credit score is making getting a joint mortgage difficult, remember that there are always other options. You may still be able to qualify for joint ownership, which won't put the borrower with poor credit's name on the loan but will grant them legal ownership of the property alongside the other borrower(s) involved.
Joint Mortgage Requirements
To qualify for a joint mortgage, you'll need to meet the same criteria as any other borrower would for a loan, which includes a decent credit score and minimal debt, among other things.
For most conventional loans, you'll want to meet the following criteria:
- A good credit score, preferably of at least 620
- Fairly low debt-to-income ratio (DTI), ideally lower than 50%
- You may have to make a down payment of 3% – 15%, though this can be higher or lower depending on the loan and lender
- Your loan amount will need to abide by the mortgage loan limits set by the Federal Housing Finance Agency (FHFA)
Pros Of A Joint Mortgage Loan
So, why would you want to get a joint mortgage loan over a loan with just your name on it? Here are a few of the benefits that come along with getting a joint home loan.
More Housing Options
With a joint mortgage, you get the chance to pool your income with another person's. This can potentially give you the opportunity to pursue homes that would otherwise be out of your individual price range, not to mention you'll likely be able to qualify for a larger loan.
As with most mortgage loans, you can typically deduct joint mortgage interest – and some other fees – when filing taxes. Typically, the person who actually paid the interest (and property taxes) is the one entitled to deduct the expenses on their report. If both you and your spouse or co-borrower paid a share of the interest or taxes, you will want to attach an explanation of that and how much you each paid to your return.
Cons Of A Joint Mortgage Loan
While pooling your resources with friends, family or a partner can open doors for you when trying to get a mortgage, this can create complications, too. Here are a few of the downsides of deciding to get a joint mortgage loan.
Full Responsibility For Mortgage Payment
Remember, if the other borrower on your loan can't afford their half of the payment, you will be responsible for the entire mortgage payment – and your credit will be impacted by their inability or refusal to pay. Similarly, if your co-borrower passes away, the responsibility for the entire loan falls to you.
With that in mind, remember that just because you can afford a more expensive home with the help of a co-borrower doesn't mean you should always go for it. Before agreeing to any loan, you should always research how much house you can afford and discuss all possible outcomes with your co-applicant(s) in advance.
Co-Mortgagees Can Sell
The legal owner of a property can force a sale, even if the other party doesn't agree, if their name is the one on the title or deed. Since a joint mortgage only means two or more parties are responsible for the loan, one person from the pair or group can still legally hold ownership of the property by themselves – and sell it, if the court agrees to their order of sale.
A Joint Mortgage Doesn't Mean Joint Ownership
As mentioned before, just because both parties are on a loan doesn't mean they own equal shares of the property. Unless they are joint tenants/have full joint ownership, it's likely that only one of the borrowers in a joint mortgage has their name on the actual house title.
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How To Get Out Of A Joint Mortgage
If you get into a joint mortgage that, for any reason, you're no longer able to be a part of, it is possible to get out of it. Escaping the legal responsibilities of a joint mortgage typically requires a refinance to remove you or the other borrower(s) from the loan.
Here are a few of your options, should you find yourself in this position.
Get Into An Agreement
If you want out of a joint mortgage, the first step you should take is to have an honest talk about the situation with your co-borrower. Since this person is likely family or a friend, it can be difficult, but if the other party understands your intentions and reasoning for dropping out of the loan, they may be more willing to consider refinancing and removing your name. If you can't agree to refinance, you likely won't be able to get out of the loan, so it's a good idea to approach the issue willing to talk things through.
Make sure to consider the costs to refinance before bringing it to your co-borrower so you can both be informed about what it would cost to remove you from the loan and leave the rest to the other party.
Buy Out Your Partner
If your partner or co-borrower wants out of a joint mortgage, it is possible to buy them out if all parties agree to it. This means you essentially give your partner(s) their share of the equity via a cash-out refinance.
You will need to have some equity built in the home to pull this off successfully, but if it's an option for you, it can be a way to remove other parties from the loan and refinance to sole ownership.
You'll need to have your home appraised, as well as determine the equity in the home that belongs to each partner. If you can all agree on a buyout price, you can proceed to refinance and become the sole owner of the mortgage. Keep in mind that you will also need to qualify individually for your lender's requirements on the new loan, which can sometimes be difficult if you originally got the loan with multiple partners.
Sell The Home
If all parties agree, it's also an option to just sell the home and move on. Rather than deal with refinancing or having to buy out a co-borrower, selling the home and going separate ways can relieve all parties of the responsibilities of the current joint mortgage loan.
If one or more of your co-borrowers is attached to the home, however, this option may not be feasible for you.
FAQs About A Joint Home Loan
Can three people be on a mortgage?
There is no legal limit to how many people can be on a mortgage, but your lender may have restrictions in place. Remember that everyone on the loan also has to be able to qualify for it to be approved, and some lenders may see a big group of names as a potential risk.
Even if multiple people aren't on a loan, keep in mind multiple parties can still own a property through joint tenancy or tenancy in common.
Can a joint mortgage be transferred to one person?
A mortgage can technically be transferred to one person via a refinance. For this to happen, you will either need to refinance to a sole ownership loan or, if your partner will not agree to it, a cash-out refinance that will give them their equity in exchange for the title of the house.
Can an unmarried couple buy a house together?
Yes, an unmarried couple can buy a house together. You don't have to be married to another person to buy a house with them or get a joint mortgage. However, there are some factors to consider when buying a home as an unmarried couple that you’ll want to research to make sure you're getting the best deal when applying individually or for a joint mortgage.
In a joint mortgage, what happens if one borrower dies?
If a co-borrower dies, then responsibility for the mortgage payment falls to the surviving borrower(s). If the deceased party had their name on the home’s title, partial ownership could potentially pass to a family member or heir through a will – otherwise, probate court will determine what happens to the deceased party’s share of the title.
The Bottom Line
Buying a home with a partner, friend or family member can be very exciting. Getting a joint mortgage can make homeownership more affordable and more feasible for many people, which makes it a good option for many first-time home buyers. Since two or more people are equally responsible for making payments, however, there can be some complications that come with a joint mortgage, particularly if you ever want to get out of it.
If you're looking to buy a home, with or without another party, you can apply today for approval from Rocket Mortgage®.
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