Joint Mortgage: A Complete Guide For Borrowers

When financing a home, a joint mortgage can be a great option – especially for first-time home buyers – because it allows you to split a loan with someone else. This often makes homeownership more affordable, but you still shouldn’t apply for a joint mortgage without carefully considering several important factors.

Understanding exactly what a joint mortgage is, how it works, and its pros and cons can help you better evaluate whether a joint mortgage is the best way for you to go about purchasing a home.

What Is A Joint Mortgage Loan?

A joint mortgage is a mortgage loan that’s shared by multiple parties – typically, a home buyer and a friend, partner or family member of theirs. Some people apply for a parent-child joint mortgage with one or more of their adult children. A joint mortgage allows two or more parties to pool their financial resources and potentially qualify for a bigger or otherwise better loan than they could’ve been approved for on their own.

Joint Mortgage Vs. Joint Ownership

Unlike joint ownership, which involves two parties equally taking on the legal ownership of a property, a joint mortgage has nothing to do with whose name is on the deed. With a joint mortgage, at least two parties are responsible for the loan – even though one of them may not have their name on the deed and possess ownership of the property.

How Do Joint Mortgage Loans Work?

When you buy a house with a joint mortgage, you share responsibility for the loan with at least one other 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, in most cases, be at least age 18.

The factors a lender will consider when deciding whether you qualify for a home loan are pretty much the same ones they’d examine if you applied for a mortgage by yourself; your lender will look at borrower credit scores, income, debt and employment history. Everyone who will be on the loan must submit a mortgage application.

If you’re approved, both you and the other party or parties involved will sign a promissory note. You’ll each be equally responsible for making payments on the loan, though one of you can make the payments on behalf of the pair or group.

Who’s Responsible If One Borrower Stops Making Payments?

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’re all equally responsible. That said, make sure whoever you decide to share a joint mortgage with is fully committed to 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 who will be on the loan. Since everyone’s credit will impact the loan you qualify for, a poor credit score can be detrimental to you or the person you’re applying with.

If your credit score or the credit score of a co-borrower is making it difficult to get a joint mortgage, other options do exist. You may still be able to qualify for joint ownership, which won’t put the poor-credit-applicant’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 requirements as any other type of borrower. That means you’ll want at least a decent credit score and minimal debt.

For a conventional conforming loan, you’ll generally need:

• A minimum credit score of 620
• A debt-to-income ratio (DTI) no higher than 50%
• A down payment of at least 3% of the purchase price (although a lender could require as much as 15% down)
• A loan amount within the conforming loan limits for your area, as 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 of a joint mortgage.

More Housing Options

With a joint mortgage, you get the chance to pool your income with another person’s or that of several people. This may give you the opportunity to pursue homes that would otherwise be out of your price range, since having two incomes on a mortgage application means you’ll likely be able to qualify for a larger loan.

The Potential For Homeownership To Be More Affordable

Having two people responsible for the mortgage payments and other costs associated with owning a home can reduce the financial burden and make homeownership more affordable.

However, simply being on a joint mortgage with someone doesn’t completely ensure that they’ll faithfully contribute to maintenance costs – or even the mortgage payment they’ve agreed to make in part. It simply allows the lender to hold them accountable if t

he mortgage payments aren’t being made.

Tax Benefits

As with most mortgage loans, you can typically deduct mortgage interest – and some other fees – if you itemize deductions when filing your taxes, rather than taking the standard deduction. 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 another co-borrower paid a share of the interest or taxes, you’ll want to attach an explanation of that and how much you each paid to your return.