With high home prices and interest rates, homeownership feels out of reach for many. If you’re worried about qualifying for a mortgage loan or affording monthly payments, a joint mortgage could be the solution that makes your homeownership dreams a reality.
A joint mortgage is a home loan shared by two or more individuals — typically spouses, partners, family members, friends, or business associates. In addition to married couples who want to build home equity together, most joint mortgages have two borrowers who need to make homeownership more affordable or lack the income or credit to qualify on their own.
A joint mortgage is not the same as joint ownership, though. All parties on a joint mortgage are responsible for repaying the loan. However, just because both names are on the application doesn’t necessarily mean all borrowers have rights to the property. Under a joint ownership arrangement, both people’s names are on the title, so they both own the home.
It’s possible to apply for a mortgage independently, with only one name on the application. However, with a joint mortgage, all co-borrowers must formally apply, and the mortgage lender will review their respective credit profiles and financial statements.
If approved, all parties receive the loan documents to review before heading to the closing table. The final step is for each borrower to sign the promissory note to execute the loan agreement.
Monthly mortgage payments should be made as agreed per the loan agreement. But life is unpredictable, so circumstances could pop up that complicate the agreement. Here are tips for handling some common issues.
Communicate with the lender to have the borrowers on the joint mortgage updated.
Surviving co-borrowers are still responsible for the monthly mortgage payments.
Heirs may have rights to the decedent’s share, depending on the terms of the loan agreement.
The co-borrower typically needs permission from other partners.
If denied, the co-borrower can only buy out other borrowers.
A forced sale can be initiated by the legal owner of the property listed on the title.
More buyer power. Mortgage lenders consider the combined income of all co-borrowers, potentially granting you access to a higher loan amount and more housing options.
Lower housing costs. Splitting the monthly mortgage payments and other housing costs beats footing the bill alone.
Boosted credit scores. As long as you make on-time monthly mortgage payments, all borrowers’ credit scores could improve over time.
Potential unexpected housing expenses. If one co-borrower cannot pay their share of the mortgage or dies, the responsibility falls on the other borrowers.
Joint ownership is not guaranteed. Co-borrowers don’t automatically assume rights to the property unless their names are listed on the property title.
Possible negative credit consequences. If one borrower doesn’t make timely contributions to the monthly payments, your credit score will take a hit. Your score could take an even bigger hit if you fall into delinquency or foreclosure due to missed payments.
Strained relationships. There’s always the risk of conflict arising among parties when money is involved, especially if your goals or financial interests in the home change.
Before signing a joint mortgage with someone else, be sure you trust them as a co-borrower — especially financially.
Read more: How much house can I afford? Use our home affordability calculator.
The lending guidelines for a joint mortgage are typically the same as you’d expect when applying independently. The rules depend on the loan program you select, and the lender evaluates all borrowers’ credit scores, employment histories, incomes, and debt-to-income ratios.
If the mortgage loan requires a down payment, the lender will also want proof that the borrowers collectively have the funds to meet this requirement.
Ready to apply for a joint mortgage loan? Here’s how to move forward with confidence.
Do your homework and ask around for recommendations. Compare lenders’ fees, interest rates, and types of mortgages. Then, narrow down your options to three to five mortgage lenders.
Once you have a shortlist of lenders, inquire about their mortgage loan programs and guidelines to find the best fit for you and your co-borrower. Get loan quotes from each and compare the terms and fees before moving forward.
Step 3: Understand the lending guidelines.
Before moving forward, you should both understand the qualifications for the type of mortgage you choose. Do you want a conventional loan? Then, you both probably need a minimum credit score of 620, and you’ll need to come up with at least 3% for a down payment.
Before submitting an application, have the identifying and financial documents handy to avoid hiccups in the lending process. Remember, because you’re applying together, you’ll each need documentation such as proof of employment, bank statements, and credit reports.
Most lenders accept joint mortgage preapproval applications online. You’ll typically need to upload or email your supporting documentation to the loan officer.
Once you’ve been preapproved and found a house you want to buy, formally apply for a joint mortgage loan. Once the underwriting team reviews the application and clears the loan for closing, review the loan documents with your co-borrower and ask them, your real estate agent, and the lender any questions you may have.
Attend the closing with your co-borrower and sign the loan documents to finalize the transaction.
Yes, it is possible to back out of a joint mortgage once you’ve closed and bought the house. Here are your options.
If your situation changes after closing and one of you doesn’t want to be responsible for payments anymore, you’ll need to refinance the mortgage. Doing so allows you to remove one person’s name from the original loan, but it only works if both parties are on the same page and agree to move forward.
If your co-borrower no longer wants to be on the joint mortgage, you can buy them out using a cash-out refinance. You’d remove their name from the mortgage and pay them their equity share before assuming sole ownership of a new loan. This strategy works best if there’s a substantial amount of equity in the property. And again, all co-borrowers must be on board.
Selling could be the easiest exit strategy if all parties agree to part ways with the home. Once the house sells, the remaining proceeds after covering the outstanding loan balance are distributed to you and your co-borrower.
If you want to keep the mortgage but your co-borrower doesn’t, a refinance may not be necessary if the lender agrees to a mortgage assumption. It simply means you assume responsibility for the monthly mortgage payments without changing the terms of the mortgage as you would with a refinance.
Government-backed mortgages, including FHA, VA, and USDA loans, tend to be assumable. You typically can’t assume a conventional loan.
Getting a joint mortgage with a spouse, partner, relative, friend, or business associate can make it easier to get approved and even unlock more buying power. But, just like any big financial decision you’ll make with another person, this approach isn’t without risks.
Be sure to understand the implications of entering into this sort of arrangement and how it can be challenging to get out of it should the need arise.
Learn more: Should you buy a house? How to know if you’re ready.
There are no legal mandates on the number of borrowers allowed on a joint mortgage, so it depends on which mortgage lender you choose. Some may allow up to four co-borrowers. Check with the lenders you’re considering to confirm what their limit is.
Yes, unmarried couples can apply as co-borrowers on a joint mortgage. To qualify, both parties must be at least 18 years old and meet the lender’s guidelines.
No, if you’re married, you don’t necessarily have to apply for a joint mortgage. If one spouse has a poor credit score or a high level of debt, it may be financially beneficial to leave their name off the mortgage application.
Yes, you can apply for a joint mortgage whether you are a first-time home buyer or not.
Laura Grace Tarpley edited this article.
