What Is A Joint Mortgage And Should You Get One?

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.

You might wonder: whose credit score is used on a joint mortgage? Or who technically owns the home? You’re in the right place to find out. Let’s take a closer look at how joint mortgages work and how to qualify for one.

What is a joint mortgage?

A joint mortgage allows two or more parties to combine their assets and income when they apply. “[It] commonly involves two people — usually spouses, joint partners, friends or family members — who pool their income and assets together to buy a home,” says Ralph DiBugnara, president of New York City-based Home Qualified, a digital resource for buyers, sellers and Realtors.

How 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 loan, all parties involved are legally responsible for paying back the loan and following its terms.

Joint mortgages don’t necessarily mean joint ownership of the home. Instead, the home’s owners are determined by the names on the home’s title. The names of those on the joint mortgage application and loan documents indicate the parties obligated to repay the debt. If a party shares in the joint mortgage, but isn’t added to the home’s title, that party might have no ownership claim to the property — but would still be responsible for repaying the debt on the property.

Joint mortgage requirements

There are some joint mortgage requirements to keep in mind if you’re considering this type of mortgage application:

• All parties must be over the age of 18
• The mortgage lender must permit joint mortgages

Also, applicants must meet the mortgage underwriting criteria laid out by that particular lender. The specifics of those joint mortgage requirements vary by lender but usually include:

• Being at or below the lender’s debt-to-income (DTI) ratio limits
• Not exceeding the lender’s loan-to-value (LTV) ratio limit, which means putting down a big enough down payment and having the house appraise at or above the purchase price
• Meeting or exceeding the lender’s minimum credit score requirement
• Being able to provide sufficient steady income to manage the mortgage payments

Whose credit score is used on a joint mortgage?

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,” says Mark Shepherd, founder of Shepherd Financial Partners in Boston. “But other lenders may increase the interest rate if the lower credit score causes enough concern.”

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. With a real estate attorney, address what happens if a co-borrower wants to sell, passes away or can’t repay their portion before you sign up for one. If you’re buying with a spouse, it’s also prudent to explore what happens in the event of a divorce. That way, everyone knows what to expect if any of these circumstances occur.

If a co-borrower wants to sell

“It’s important to review the terms of your joint mortgage very closely,” says Chris Cohen, the Austin, Texas-based chief product officer for Kasasa. “If one co-borrower wants to sell while the other co-borrowers 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 to reflect the change.

“In some cases where the joint mortgage doesn’t have terms that automatically pass the loan on to the surviving parties, 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,” says Cohen. “If the co-borrower can’t afford to pay back the loan, the judge may request a loan refinance or have the surviving parties sell the property.”

If you or a co-borrower can’t afford payments

Here, joint mortgages aren’t different from other types of home loans. If one or more of the parties on the joint mortgage can’t repay what was borrowed, it’s important to talk to the lender as soon as possible. Sometimes, they can work out an agreement with you (e.g., mortgage forbearance).

If you stop making payments past the lender’s grace period, you can go into foreclosure. What happens next depends on your state, but it usually means the lender can take the house and sell it to recoup their losses.

Should you get a joint mortgage?

Of course, there’s no single absolute answer. Consider these benefits and drawbacks:

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,” says DiBugnara. “More income and/or assets equals the ability to borrow more money when it comes to obtaining a mortgage.”
• Easier to make ends meet: Being able to combine your 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,” says Shepherd.

Cons of a joint mortgage

• Impact on borrowing power: Since it increases the overall debt attached to you, having your name on a joint mortgage might negatively affect your ability to obtain other loans, says Cohen.
• Risk of default: “If one party stops contributing, it could put the other party in an undesirable financial position,” says Melissa Gasparek, U/W Liaison II at Guild Mortgage.
• Forced sale or refinance: It can also get complicated if one party wants to get out of the joint mortgage agreement. “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,” says Gasparek.

That’s why 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,” says Gasparek.

Who is a good candidate for a joint mortgage?

Good candidates for joint mortgages 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 for a joint mortgage?

“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,” says Shepherd.

Those with low credit scores should also steer clear of this arrangement, as the mortgage lender might not favor the highest credit score of all joint mortgage parties involved when evaluating the loan application.

How to apply for a joint mortgage

“If you can reasonably afford the full mortgage by yourself, it makes sense to eliminate complexity long-term by avoiding a joint mortgage,” says Cohen. But, if you decide to apply for a joint mortgage loan, here’s how to move forward:

1. Submit a loan application. To apply for a joint mortgage, each co-borrower needs to fill out and submit a loan application. Be sure to shop around with multiple lenders and compare interest rates before applying with a lender.
2. Provide supporting documentation. The lender will likely request several documents, including proof of income, savings, debt details and employment history for all parties.
3. Finalize the loan. Review and sign all necessary disclosures and paperwork at closing. Again, all parties need to be involved here and sign.

Keep in mind that the steps to originating joint mortgages will vary by lender, so be sure to ask for details (how easy or hard the process is could influence your choice of lender). Overall, though, have patience. “With a joint mortgage application, expect the overall lending process to take longer,” says Cohen.

Joint mortgage FAQ

• Can more than two people apply for a joint mortgage?
  

  Yes, more than two people can be part of a joint mortgage application. There is no specific limit to how many people can apply for a joint mortgage, though most lenders accept no more than four people.

• Can an unmarried couple apply for a joint mortgage?
  

  Yes, people who are not married but want to purchase a home together can apply for a joint mortgage. This could include friends, siblings, parents and children or partners. As long as all parties are over 18 and the lender allows a joint mortgage, individuals who are not married can apply for a joint mortgage loan.

• How does a joint mortgage impact tax benefits?
  

  If you’re a co-owner of the home (your name is on the title and you’re paying a portion of the mortgage), then you can deduct your share of the mortgage interest on your federal tax filings. This assumes you opt to itemize your tax deductions, rather than electing the standard deduction.