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.
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.
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.
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.