How Does a Joint Loan Application Work?

By: Craig Berry Reviewed By: Paul Centopani
September 6, 2023 - 5 min read

What are joint mortgage applications?

Inflated home prices and elevated mortgage rates have made affordability a challenge for many homebuyers. Fortunately, joint home loans combine financial resources and can make qualifying for a home loan significantly easier.

If you’re thinking about buying a home with someone else, you’ll want to understand how joint mortgages work. While joint mortgages have many benefits they have some potential downsides to consider, as well.

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What is a joint loan?

A joint mortgage is when two or more individuals apply for a home loan with the purpose of buying a house. Each applicant’s income, credit history, and financial situation and factored into determining the eligibility for the mortgage and the loan amount.

This type of mortgage loan is commonly used by couples, family members, friends, or even business partners who want to purchase a home together.

An important distinction is that a joint mortgage does not equate to joint ownership.

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Joint mortgage borrowers share the responsibility for repaying the loan with the other applicants. However, unless there is joint tenancy or full joint ownership – meaning all parties are on the loan and the title – only one party may truly own the property.

On a joint mortgage, both you and the other mortgage borrower’s credit scores will come into play. Your lender will review each of your credit scores from all three of the major credit bureaus and see which one is the “lower middle” score.

If you decide on a joint mortgage, the best idea is to check your credit scores early. Taking steps to improve your credit scores can result in a better mortgage rate and lower payment.

If you find that your co-borrower has bad credit, you may want to consider finding a different co-borrower, or seeing if you can qualify on your own.

Who qualifies for joint mortgage loans?

Most lenders accept joint mortgage applications. Rarely do lenders have specific requirements as to who is allowed on a joint mortgage.

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Commonly, joint mortgages are obtained by married couples. When two people enter a marriage, or similar commitment, finances are often shared. So, it may make sense to share the obligation of home ownership, including the mortgage.

Qualifying criteria for a joint mortgage application is like those for individual mortgage applications. For conventional loans, while lender guidelines may vary slightly, most require the following:

  • Credit score of 620 or higher
  • Minimum down payment of 3% - 5%
  • Debt-to-income ratio of 40% - 50%
  • Employment history and verifiable income
  • Loan amount that is at or below the conforming loan limits (currently $726,200 in most areas)

Some lenders are more flexible than others so it’s wise to shop around and compare.

Pros of joint mortgages

Joint mortgages can have many advantages. They bestow homeownership on individuals who may otherwise not qualify for a loan due to insufficient credit or income.

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Because the financial burden of monthly mortgage payments is shared, it can make it more affordable and manageable for all parties. Joint mortgages can also offer tax advantages, such as shared deductions for mortgage interest and property taxes.

Business partners or friends may pursue a joint mortgage as a way to get into real estate investing. Pooling your resources could potentially generate rental income or profit from the home’s appreciation.

Another advantage to a joint home loan is that you may be able to borrow more than you’d be able to if borrowing individually. Lenders combine all incomes on joint mortgage applications to determine how much you may qualify for.

Cons of joint mortgages

Joint mortgage can also come with potential challenges. These disadvantages should be carefully considered prior to entering into a joint mortgage agreement.

Even if you do everything right, make your portion of the shared payments on time, etc. there’s no guarantee that your co-borrower will do the same. If there’s a breakdown in communication or unexpected changes in circumstances, such as divorce or unemployment, all parties could be affected.

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It’s important to remember that all borrowers are on the hook in the event of default. If one borrower fails to make their share of the payment, the remaining borrowers must cover the shortage.

Not only can defaulting negatively impact everyone’s credit and potentially lead to legal consequences, professional and/or personal relationships can be impacted should either person fail to hold up their end of the bargain.

Moreover, important decisions regarding the property need to be agreed upon by all parties. These shared decisions include putting an addition on the home, when to sell and for how much. Coming to a mutual agreement on such big issues could be tough.

How to know if a joint mortgage is right for you

One of the main benefits of getting a joint mortgage is it means you may be able to purchase or own more home than you could on your own.

But it’s important that each party is in full agreement when it comes to the decisions about the home, as well as the shared responsibilities.

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Bear in mind that being a co-borrower on a joint mortgage could impact your ability to obtain other loans. Typically, when applying for other forms of credit, the entire mortgage payment is considered your obligation. This is regardless of how the monthly mortgage payments are shared.

Ideal candidates for joint mortgages include those who already share financial responsibilities. Spouses or life partners — or people who currently cohabitate and share financial interests — tend to be “safer” co-borrowers.

If you can afford to purchase a home with great loan terms, it may make more sense to eliminate the potential risks of adding co-borrowers and just go at it alone. Your lender could assist you and answer any questions you may have.

The bottom line on joint mortgage loans

Joint mortgages come with the advantage of combining the income and assets of multiple borrowers, potentially increasing your borrowing power and affordability.

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A joint mortgage also involves shared liability, however. Prior to entering a joint mortgage agreement, all parties should carefully consider all the advantages and potential disadvantages. Open communication and trust are key.

Don’t forget to speak with your lender about whether you qualify on your own, or if a joint mortgage is your best option.

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Craig Berry
Authored By: Craig Berry
The Mortgage Reports contributor
With over 20 years in mortgage banking, Craig Berry has helped thousands achieve their homeownership goals.
Paul Centopani
Reviewed By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.