How co-borrowing works
A co-borrower applies for the mortgage with you and signs the loan. Their income can help you qualify, and their debts count against you. Both of you are on the hook for the full payment. If one person stops paying, the lender can look to the other for all of it.
Co-borrowers are usually also on the title, so they share ownership. A co-signer, by contrast, may share the debt without owning the home. Ask your loan consultant which setup fits.
How lenders review you
- Income: both incomes can count toward qualifying, if they're documented.
- Debts: both sets of monthly payments are added to figure your debt-to-income ratio.
- Credit: lenders pull both reports. Many look at each borrower's middle score, and pricing is often based on the lower one. Rules vary by loan type.
- Assets: down payment and reserves can come from either of you, with documentation.
Do both of you need to live there?
Not on every loan. Some programs allow a co-borrower who won't live in the home, often a parent helping a child. Others have stricter rules. The loan type and the occupancy of each borrower affect what you qualify for, so tell your loan consultant upfront.
How you'll hold title
Title is how you legally own the home together. The options and their names vary by state. Common ones include:
- Joint ownership with a right of survivorship, where the survivor takes the whole home.
- Ownership in shares, where each person owns a set share they can leave to heirs.
- Special forms for married couples in some states.
Put it in writing
Friends, siblings and unmarried partners often benefit from a written co-ownership agreement. A real estate attorney can help you draft one. Cover:
- Who paid what toward the down payment and closing.
- How you'll split the monthly payment, taxes, insurance and repairs.
- What happens if one person wants to sell or move out.
- How a buyout would be priced.
- What happens if one of you can't pay.
Removing someone later
Life changes. If one co-borrower wants off the loan, the usual path is a refinance into the other person's name, which they'll need to qualify for alone. Changing the title is a separate step. With CapCenter's ZERO Closing Costs, a refinance comes without the closing costs typically charged to process the loan (restrictions apply), though deed recording fees may apply.
