4 Beloved Mortgage Rules Homebuyers Should Break Right Now
Key Takeaways
- Joint mortgages allow two or more people to combine their assets and income to qualify for a home loan.
- Joint mortgage loans don't impact the ownership of the home, which is dictated by the names on the property title.
- When applying for a joint mortgage, lenders consider the credit score of all parties who are part of the mortgage application.
If you're concerned you might not qualify for — or be able to afford — a mortgage, you can consider teaming up with one or more other parties on your application. Known as a joint mortgage, this sort of home loan works pretty much like any mortgage, but also carries some unique features.
What Is a Joint Mortgage?
"Commonly involves two people, usually spouses, joint partners, friends or family members, who pool their income and assets together to buy a home."
— Ralph DiBugnara, President, Home QualifiedHow a Joint Mortgage Works
With a typical mortgage, your name alone is put on the application, making you solely responsible for repaying the loan. With a joint mortgage, all parties involved are legally responsible for paying back the loan and following its terms. A joint mortgage doesn't necessarily mean joint ownership of the home — ownership pertains to the names on the home's title. If a party shares in the joint mortgage but isn't added to the title, that party might have no ownership claim to the property, but would still be responsible for repaying the debt.
Joint Mortgage Requirements
- All parties must be over the age of 18
- The mortgage lender must permit joint mortgages
- Applicants must meet the mortgage underwriting criteria, including debt-to-income ratio limits
What Credit Score Is Used on a Joint Mortgage?
The credit scores used on a joint mortgage may vary by lender, but typically lenders review the credit scores of all co-borrowers on the application.
"Some lenders are more flexible than others if the credit score of one of the parties is lower than the other; they might favor the higher credit score in their evaluation of the application. But other lenders may increase the interest rate if the lower credit score causes enough concern."
— Mark Shepherd, Shepherd Financial Partners, Boston
What Are My Rights on a Joint Mortgage?
It's crucial to understand your obligations and rights when you enter into a joint mortgage agreement. Be sure to address with a real estate attorney what happens if a co-borrower wants to sell or passes away before you sign up for one.
If a Co-Borrower Wants to Sell
If one co-borrower wants to sell while the others don't, they can't sell the property without permission from the others. If an agreement isn't reached, the co-borrower can buy out the other parties at an agreed-upon price, sell their ownership stake to someone else, or settle the matter in court and force a sale.
If a Co-Borrower Passes Away
If a co-borrower on the mortgage dies, the lender will need to be notified immediately. It will remove the deceased person's name from the joint mortgage and update the terms. In some cases, the matter may need to be resolved in probate court where a judge will determine the next steps for the co-borrowers and the lender.
Pros of a Joint Mortgage
Qualifying for a Larger Loan
"The main benefit is the ability to purchase or own more of a home than you would be able to buy on your own. More income and/or assets equals the ability to borrow more money when it comes to obtaining a mortgage."
— Ralph DiBugnara, President, Home Qualified
Easier to Make Ends Meet
"Combining wages and down payment not only increases your purchasing power, it makes it easier to pay the mortgage due each month, allowing you to have more funds in your budget to save for future goals."
— Mark Shepherd, Shepherd Financial Partners
Cons of a Joint Mortgage
Impact on Borrowing Power
Having your name on a joint mortgage might negatively affect your ability to obtain other loans.
Risk of Default
If one party stops contributing, it could put the other party in an undesirable financial position.
Forced Sale or Refinance
If the joint loan involves joint ownership — meaning all co-borrowers are listed on the title — one party could force a sale or refinance of the property even if the other party doesn't agree.
"It's best for borrowers entering into a joint mortgage transaction to have a solid, long-standing relationship with each other built on trust to avoid any potential disputes down the line."
— Melissa Gasparek, U/W Liaison II, Guild Mortgage
Who Is a Good Candidate for a Joint Mortgage?
Good candidates include those who share financial responsibilities beyond the purchasing or owning of a home, such as spouses, life partners, and people who plan to cohabitate together and share ownership — meaning all names are on the title.
Who Is a Bad Candidate?
Parties who might have a shaky relationship or who aren't aligned in their financial interests in purchasing, owning, and maintaining the property aren't good candidates. Those with low credit scores or derogatory credit should also steer clear, as the mortgage lender might not favor the highest credit score of all joint mortgage parties when evaluating the loan application.
How to Apply for a Joint Mortgage
Submit a Loan Application
Each co-borrower needs to fill out and submit a loan application. Shop around with multiple lenders and compare interest rates before applying.
Provide Supporting Documentation
The lender will likely request proof of income, savings, debt details, and employment history for all parties.
Finalize the Loan
Review and sign all necessary disclosures and paperwork at closing. All parties need to be involved and sign.
"With a joint mortgage application, expect the overall lending process to take longer."
— Chris Cohen, Chief Product Officer, Kasasa
Key Takeaway
A joint mortgage can be a powerful tool for buyers who need to combine income and assets to qualify — but it comes with shared legal responsibility and potential complications if the relationship changes. Ralph DiBugnara notes the core benefit is simple: more income and assets means the ability to borrow more. Just make sure you and your co-borrower are aligned before you sign.
Originally published on Bankrate by Erik J. Martin, edited by Laurie Dupnock, reviewed by Thomas Brock · April 29, 2024.
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