A joint mortgage is when more than one person’s names appear on the home loan. Getting this type of mortgage can be beneficial if you’re looking to get equal ownership of the home you want to buy, as well as if you want to split the cost of the down payment and the monthly mortgage payment.
That said, when more people’s names are added to the loan, there are more factors and risks to consider, such as additional debt or the other person having a lower credit rating. You can get one with friends, a relative, a romantic partner, or anyone else, but you’ll want to make sure it’s the best idea for your situation.
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How do you qualify for a joint mortgage?
To be eligible for a joint mortgage, the financial situation of both applicants must be examined. Below is a brief overview of what most lenders are looking for.
- Combined income: Two incomes could help you qualify for a house at a higher price.
- Debt to income ratio: The minimum payment amounts for your two debts will be considered when applying for this type of mortgage. Most lenders recommend a debt-to-income ratio no higher than 43%. This means that if you and a partner earn $70,000 a year and want to apply for a joint mortgage, your minimum monthly debt payments, including your new mortgage payment, should not exceed $2,508.
- Credit history: When two or more people apply for a mortgage together, the lender will consider each person’s credit and often use the lower score to approve or deny the mortgage. As with any other loan, if you have late payments or defaulted accounts on your credit report, it could affect your approval rate.
- Wealth and savings: The advantage of applying for a joint mortgage is that you and the other person’s assets and savings will be taken into account even if they are not joint assets. This means that if a married couple wants to apply for a home loan and each has their own savings to consider for the down payment, this could increase your approval amount because more money can be invested in a home.
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What credit score is needed for a joint mortgage?
If you opt for a joint mortgage, your and the other person’s credit score will come into play. Lenders will usually look at each of your credit scores from the three major credit bureaus and see which is the “lower average” score.
This means that if your three credit scores are 750, 725 and 715, and your partner’s scores are 699, 680 and 674, lenders will take your two average scores – 725 and 680 – and use the lower of the scores. two average scores, which in this case is 680. It’s important to make sure you and your partner both have good to excellent credit scores to qualify for the best mortgage rate.
If you find that one of you has bad credit, consider an alternative option, such as finding another co-signer or applying for a single applicant mortgage instead. Keep in mind that with a single applicant mortgage, this means you won’t be able to use the other person’s income or assets to qualify for your home loan.
If you know you might want to get a joint mortgage, it’s best to start checking your credit scores early and take steps to improve the lower score. This may mean paying off existing debt, waiting for tough inquiries and delinquent accounts to clear your credit report, or trying a secured credit card to build a positive payment history.
If you choose to go with a co-signer at this time, you can try to find a relative with very good credit to help you qualify. And to free up the co-signer, you can always refinance your home down the line. Visit Credible to pre-qualify for a mortgage refinance in minutes and compare the best rates from different lenders.
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Is it better to apply for a mortgage jointly?
If you’re in a committed relationship or thinking about getting a joint mortgage with a friend, relative, or real estate partner, there are many benefits to applying with someone else. You’ll be able to combine your income, which could increase your approved amount, and you’ll have the ability to use more savings and assets to make a bigger down payment.
On the other hand, if you or the other person doesn’t have a good credit rating, it could hurt your chances of getting a mortgage together. Or you could end up with a higher interest rate, which means you’ll be paying thousands more on your loan over time.
While there is always the option of refinancing your home eventually to save money on interest, getting a joint mortgage may not be the best decision for you right now if you or the other person are not financially ready or if either of you has very poor credit. Goal. Visit Credible to connect with an experienced loan officer to get your mortgage questions answered so you can make an informed decision that’s best for you.
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