All you need to know
How does a joint mortgage work?
In a joint mortgage, all of the co-mortgages are legally responsible for the entire loan. This means that if you and a friend each agree to pay off half the loan and your friend goes bankrupt, the lender might try to collect the full payment from you.
In addition, lenders consider the credit rating and risks of both borrowers when deciding on loan rates and terms. If your co-borrower has a good credit rating and substantial income, their success could help you get a good rate. On the other hand, if your co-borrower has bad credit, it could affect your ability to get approved for a loan.
When you apply for a joint mortgage loan, you and the other person (s) you are sharing the loan with each apply. The lender will consider several key eligibility criteria of each co-borrower, including:
If the lender approves your joint mortgage, you will each sign the promissory note. At this point, you each become responsible for the payments. You will generally only have to make one joint monthly payment. Take the time to decide who should send the payments.
If you are considering a joint mortgage paid by one person, make sure borrowers who are not paying on your mortgage know their responsibilities. The lender can legally sue some or all of the borrowers for payment, even if those borrowers were not originally planning to contribute to the repayment of the loan.
Only take out a joint mortgage with someone you trust. Joint mortgages are often used by couples to buy a home together, but they don’t have to be. You can get a joint mortgage with relatives, friends, or co-investors.
What credit score is used for a joint mortgage?
When individuals apply for joint mortgages, the lender reviews the credit scores of all applicants. Since your credit score affects your mortgage rates, you’ll want to make sure that you and all co-borrowers have done everything possible to improve your credit before borrowing.
Lenders may be more willing to lend to a borrower with bad credit if other borrowers have good credit. However, they will still view it as a riskier loan. Bad credit from a borrower could affect both your ability to get a loan and the rate you are offered.
Will my credit score be affected?
Yes: Joint mortgages with co-borrowers appear on each borrower’s credit report. If you pay it responsibly, it can help boost your credit score. But if you or your co-borrower miss a payment, it can hurt both of your credit scores.
When you apply for a joint mortgage, the lender will do a thorough investigation of your credit report. Too many inquiries can have a slight negative impact on your credit score. However, many lenders allow you to shop around and pre-qualify for a loan without a credit check. This allows you to compare loan terms and find the best mortgage lenders without worrying about hurting your credit.