Joint Homeownership: The Essentials of Co-Borrowing on a Mortgage

Here's what you need to know about getting a mortgage with a co-borrower.
Jan 10, 2024

Co-borrowing on a mortgage is a significant financial decision that can influence both your homeownership journey and your relationship with the co-borrower. Understanding the ins and outs of this arrangement is crucial before diving into joint homeownership. Here's what you need to know about co-borrowing on a mortgage.

What is a Mortgage Co-Borrower?

A mortgage co-borrower joins the loan application with another individual to either boost the chances of loan approval or secure better terms such as a larger loan amount or lower interest rates. Co-borrowers share equal responsibility for repaying the loan and are automatically listed as co-owners on the property's title.

Co-Borrower vs. Co-Signer

A key distinction exists between a co-borrower and a co-signer. While both share the financial responsibility, a co-signer is not included on the property's title and does not have ownership rights. In contrast, a co-borrower is listed on both the mortgage and the title, holding an ownership stake in the property.

Types of Co-Borrowers

Two types of co-borrowers exist: occupant and non-occupant co-borrowers. The former lives in the home with the primary borrower, while the latter doesn't reside in the property but holds an ownership stake.

Eligibility Criteria for Co-Borrowers

Lenders have specific criteria for co-borrowers, varying by loan type and lender. Co-borrowers typically must not have a financial interest in the property sale and need to meet credit, residency, work history, and debt-to-income ratio requirements.

Choosing a Co-Borrower

Selecting a co-borrower demands careful consideration. Assess the relationship dynamics and ensure the co-borrower has a strong credit profile and financial stability to handle mortgage responsibilities.

Rights and Responsibilities of Co-Borrowers

Co-borrowers' rights align with their title holding. Joint tenants have equal ownership, while tenants in common may have varied ownership percentages. Removing a co-borrower from a mortgage is challenging and often requires refinancing or selling the property.

Should You Add a Co-Borrower?

The decision to add a co-borrower hinges on various factors, including your ability to qualify for a mortgage solo and your comfort with shared responsibility. Consider alternative loan options with relaxed credit requirements if seeking approval independently.

Applying for a Mortgage with a Co-Borrower

To add a co-borrower, initiate the pre-qualification process with your lender. Both parties must complete the loan application and undergo credit checks and financial evaluations.

Understanding co-borrowing nuances is crucial in making informed decisions about homeownership. Balancing the benefits of better loan terms with long-term responsibilities is key to a successful co-borrowing arrangement.

Mark Liesner, RMLO ID #1445514, Licensed in Texas (but I can help in most states). Edge Home Finance Corporation, 4530 West 77th Street, Suite 365, Edina, MN 55435 NMLS ID#891464 Copyright © 2024. All Rights Reserved. Equal Housing Lender.This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without prior notice.All products are subject to credit and property approval. Not all products are available in all states or for all dollar amounts. #multimillonaire #240 If you are refinancing your existing loan, your total finance charges may be higher over the life of the loan. Other restrictions and limitations apply. Residential Mortgage Loan Originator.