How Many Borrowers Can Be On A Mortgage?

There are many reasons why two or more people may want to buy a home together. Beyond married or cohabiting couples, there are multi-generational homes, co-living spaces, or situations in which a parent helps a child with housing costs or two people partner on an investment property — among other scenarios.

And if you’re contributing to a home, it makes sense — and gives you a layer of security — to have an ownership interest in the property. But how many people can be on a mortgage? Here’s what you need to know about buying a home with multiple borrowers.

How many people can be on a home loan?

There’s no legal limit as to how many people can be co-borrowers on a home loan. A co-borrower is someone who shares legal ownership of the home and responsibility for repaying the loan.

However, as a rule of thumb, no more than four borrowers are typically allowed on a conventional mortgage.

This is due to computer software. Fannie Mae’s Desktop Underwriter tool — which many financial institutions use to evaluate mortgage applications — only supports up to four borrowers. If there are more than four applicants, the lender would have to manually underwrite the mortgage, which many big banks don’t do anymore. So while you may be able to get a mortgage with more than four borrowers, you’ll have fewer financing options.

Pros and cons of having more than one name on a home loan

Pros of having multiple names on a home loan

• Easier qualification: Applying with a co-borrower might make it easier to qualify for a loan, provided he or she has good credit and a steady job with a stable income. You might also be able to make a larger down payment if you and your co-borrower — or co-borrowers — can combine forces.
• Co-borrower’s name on the title: Applying with a co-borrower allows you to put their name on the title. This is important if you plan to jointly own the home. Note that if you want to add someone to the title without going through underwriting, you can file a quitclaim deed after closing.
• Shared costs: Having multiple people on the mortgage allows you to share costs, making homeownership more affordable.

Cons of having multiple names on a home loan

• Potential credit impact: Co-borrowers are both wholly responsible for loan payments. If one borrower stops paying their share of the loan, the other must continue to pay to avoid damaging their credit or losing the home to foreclosure.
• Shared decision-making: It can be challenging to agree on homeownership issues, including who is responsible for maintenance and repairs and what to do if one person wants to sell the home, but the other does not.

Requirements for buying a home with co-borrowers

All of your co-borrowers must meet the lender’s basic eligibility requirements. This usually involves a minimum credit score and a maximum debt-to-income (DTI) ratio, among other factors. Specific loan types also have other requirements for who can and can’t be a co-borrower:

• Conventional loans: A co-borrower can be anyone who qualifies for the loan, whether or not they’ll live in the home with you.
• FHA loans: You may have a non-occupying co-borrower as long as they have a primary residence in the U.S., but unless the co-borrower is a family member, this will require you to make a 25 percent down payment.
• VA loans: VA loans allow co-borrowers, but it’s best if the co-borrower also qualifies for a VA loan, unless he or she is the qualifying borrower’s spouse. If the co-borrower is, say, a friend who doesn’t qualify for a VA loan, the VA won’t guarantee their portion of the loan.
• USDA loans: USDA loans don’t permit non-occupant co-borrowers.

Tips for buying a home with multiple people

Before you agree to a joint mortgage, protect yourself and consult with a business or real estate lawyer who can explain your options and outline the risks you face.

Obtain legal advice

“Contact an attorney to work out what type of entity is going to take title to the property,” says Jim Finn, an attorney at Gregg, Hunt, Ahern & Embry in Cambridge, Massachusetts. “This could be an LLC, a corporation, a trust or a partnership. Once you decide what would work best for your particular situation, then the attorney can draft the legal documents.”

Form an LLC

If you’re going in on an investment property with a few friends or family members, forming an LLC can protect members from liability if there’s a dispute or lawsuit, or if someone stops paying the mortgage or wants to sell the property.

“If it’s an investment, I would suggest they do an LLC because that’s going to give them insulation from personal liability,” Finn says. “They would have an operating agreement which would spell out how they’re going to split proceeds and share costs.”

Check with lenders first

Before you form an LLC, however, make sure your lender is open to giving joint mortgages to LLCs or similar entities. “Some lenders do not want trusts or LLCs to be on the mortgage. They want individuals,” Finn says.

How to apply for a mortgage with multiple borrowers

Assuming your lender and loan type allows your co-borrowers, the application process will be similar to that for a loan without co-borrowers. Each person must submit a loan application — along with documentation of their work history, income, assets and debts — and undergo a credit check. All parties must attend closing day together.

How to remove a name from a mortgage

It’s possible to remove a name from a mortgage, but that doesn’t mean it’s easy. Most lenders won’t be excited by the removal, because it means there’s now one less person to pay the loan back. Generally, you have a few options:

• Refinancing the mortgage without the co-borrower. You’ll need to be able to qualify for the mortgage by yourself or with your remaining co-borrowers.
• Selling the home and buying a new one without the co-borrower. You’ll need to figure out how to equitably split the proceeds and afford a new home with what you have left.
• If you have an assumable loan, it may be easier to adjust the co-borrowers. This option is generally available on government-backed loans.

FAQ

• How many co-borrowers can be on a mortgage for a vacation property?
  

  Most mortgages for vacation properties are conventional loans, as you can only use a government-backed loan to fund a primary residence. Loans for vacation homes have the same co-borrower rules as other conventional loans: You can have up to four in most cases, as long as all borrowers qualify.

• If you have bad credit, how many co-signers can you have on a house to boost your approval odds?
  

  A co-signer is different from a co-borrower in that he or she shares responsibility for repaying the loan, but not ownership rights to the home. Generally speaking, the same limits apply to co-signers as to co-borrowers. In order to increase your approval odds, you’ll want to make sure your co-signers have solid work histories and income, good credit and minimal debt.