Considering a joint mortgage? Here’s what you need to know

If you live with someone else and are thinking about buying a home, odds are you might be looking into joint mortgages. Getting a joint mortgage with a partner or trusted friend could be beneficial because you can put your incomes and credit scores together when applying with a lender.

Another benefit of joint mortgages is being able to split your monthly payment. While the process of obtaining a joint mortgage may seem very similar to a standard mortgage, there are some key differences to keep in mind. Knowing these factors ahead of time can help you determine if a joint mortgage is ultimately right for you.

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What are joint mortgages and how do they work?

A standard mortgage is typically when just one person applies for a home loan and gets approved. If you're looking to buy a property with another person or even several home buyers, you’ll need to get what’s called a joint mortgage. Even though many lenders allow up to four people to apply for a mortgage together, we will refer to a ‘joint mortgage’ as a mortgage among two different people for the sake of clarity and consistency in this article.

Almost anyone can apply for joint mortgages, as long as you’re at least 18 years old. This option may seem ideal for married couples or unmarried couples who share finances anyway, as well as roommates or even friends looking to buy real estate together as a business venture. It may also be helpful for anyone who feels they can’t qualify for a mortgage on their own without a cosigner. Everyone whose name will be on the loan needs to qualify and apply for the mortgage.

On the bright side, you and the other person can put your finances and income together so you may able to get approved for a larger loan. But on the flip side, each person’s credit history, liabilities and debt-to-income ratio will be considered, as well. If one of the applicants has bad credit, it may be difficult to be approved for a joint loan.

Joint mortgages are often confused with joint ownership, which is different. Joint ownership is when the property title or deed is in both your name and the other person’s name. That said, you can be financially responsible for a property through a joint mortgage but not have legal responsibility through joint ownership if your name is not on the deed.

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How to you qualify for a joint mortgage

To qualify for a joint mortgage, both home buyers need to get pre-approved before filling out a joint application. Lenders will want to see that you can financially afford a mortgage, so they will look at your:

• Income and possibly even consider how long you’ve had your job
• Bank statements
• Credit score
• Other debt and liabilities

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With joint mortgages, all parties must qualify. Lenders might use what’s called your ‘lower middle score,’ which takes all three of your scores from the major credit bureaus and singles out the middle score for each applicant. Then, the person with the lowest middle score is the one whose credit score is used to qualify for the mortgage loan. This is why it’s important to make sure each person has a good credit score with all the major credit bureaus.

Lenders will also consider your joint debt-to-income ratio, which is all your minimum debt payments per month divided by your total income. The recommended maximum debt-to-income ratio for most mortgage lenders is 43%.

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Other factors to consider

Getting a joint mortgage might work for your situation, but it’s not always the best option for everyone. Combining your income with another applicant could help you qualify for a larger loan, just like combining your savings and assets could help you make a bigger down payment. However, if you or the other person have a lot of debt or a poor credit score, this may hinder your chances of getting approved for a joint mortgage.

You’ll also need to consider how you’ll manage a large debt like a home loan with another person, since you'll be equally responsible for monthly payments. Both parties will have a shared responsibility for the mortgage, and it's important that you don't enter a joint mortgage if you can't rely on the other person to make monthly payments. It’s best to make sure you have each other’s full trust and will be transparent as you navigate the home purchase process.

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