Joint mortgage requirements are the same as home loans for only one person. The difference is the complexity of qualifications. With more than one person, the bank must get and verify more documents.
- The qualification process for a joint mortgage is the same as that for a single borrower.
- Each borrower is equally responsible for paying the loan.
- You can have a joint mortgage with a single homeowner.
Each spouse or partner is equally responsible for paying the loan. If one partner fails to pay, then the lender goes after each person on the mortgage. Late payments and foreclosure hurt each borrower equally. Therefore, be careful who you enter such a large loan with.
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How Do You Qualify for a Joint Mortgage?
You qualify for a joint mortgage in much the same way you do for an individual mortgage. The process is the same, and it includes three steps.
- Pre-Qualification
- Pre-Approval
- Underwriting and Qualification
If only one person applies for a loan, then the bank uses only their financial information. For joint mortgage requirements, the lender cares about the financial health of everyone who will be responsible for the loan. For married couples, though, Banks will investigate the financial records of the spouse even if they are not on the mortgage.1
Pre-Qualification
A pre-qualification for a joint mortgage is a quick and simple process. It acts as a first step in the home buying process. Your lender will:
- Ask you to estimate your income
- Run a credit check
- Want your bank account balances
- Estimate your down payment and loan amount
That last point is the most important part of this task. Most home buyers have only a vague idea of how much they can afford. Pre-qualification provides a much clearer picture of what you can afford. Remember, though, that this is just an estimate. No lender will approve a loan without a more rigorous inspection of your financial situation.
Pre-Approval and Qualification
Once your lender pre-qualifies you it is time to look for houses in your price range. As you search, though, you need to begin the more detailed process of pre-approval. This involves documenting income, assets, and debts, and it takes a while. At this point, your lender will:
- Need pay stubs and verification of employment history
- Run a credit check if they have not already requested one
- Require recent bank statements or account numbers for all your financial accounts
- Tax returns (personal and business) for the past two years
It takes time to gather this information. It also takes time for the bank to verify the information. This process will take time, and you should do it while you are looking for your house. This is because the seller does not care about a pre-qualification. They want to see that you are approved for a loan large enough to cover the price of the house. Therefore, you should have a pre-approval in hand when you make an offer to buy a house.
The pre-approval is most of the qualification process, but not all of it. Once you make an offer and sign a contract to buy a property the lender sends everything to underwriting. Underwriters check your financial documentation even more thoroughly. They also want to know if the house really is worth as much as you want to pay for it. To do this they want an appraisal of the house. After the underwriter approves the loan, they release the funds, and you can close the deal on your new home.
Who is Responsible for Paying a Joint Mortgage?
A simple answer to this question is whoever signed the agreement and is listed on the mortgage is all equally responsible. Things happen, though. Some instances include a business partnership dissolves, a divorce, or a death. What happens then?
The lender requires the borrowers to pay for the entire life of the loan. If business partners have a falling out or one wants to retire, then they must pay off the existing loan. The remaining partner(s) must get a new loan after that.
The case of divorce is similar. The bank holds each borrower responsible for the life of the loan. Often, the borrowers want to sell the property and move on. However, many times one spouse wants to remain in the home. In this case, they must pay off the existing mortgage and refinance the loan, so that only their name is on the mortgage.
The case of death is more complicated. For a married couple, the property passes to the surviving spouse without the need for a mortgage refinance. The surviving spouse continues to pay the existing loan. However, if it is left to anyone else, including an estate, the bank requires the loan to be paid in full. If you inherit property with a mortgage you need to refinance so that the loan is in your name.2
Is It Better to Have a Joint Account When Applying for a Mortgage?
There are benefits to having a joint account. These include:
- Easy to pool resources for a common goal
- Transparency
- Easy to share financial responsibilities, like paying bills
These are sound reasons to open a joint account with your spouse or business partner. Indeed, it will it easier to pay the mortgage transparently. If you combine individual accounts into one joint account, you can keep up with your finances better. However, your lender will want to see all your accounts no matter how many there are. While combining your finances into one joint account will make it easier, your lender will not require it.
Can We Get a Joint Mortgage if One Person is not Working?
You can get a joint mortgage if one person is not working. Joint mortgage requirements include income but not necessarily employment. You may not want to, though. The main reasons to apply for a joint mortgage are to get a lower interest rate, a bigger loan amount, or better terms. Someone with no income probably will not help with any of those.
One consideration is the credit score. If they have a higher score, it will not help because the bank considers the lower one. If your partner has a lower score, it will hurt you. Therefore, your unemployed spouse can only hurt you for this point.
Another factor is income. Your spouse does not help you at all at this point either. A third thing to consider is your debt-to-income ratio. With no income, any debt will look big. Therefore, this will be a negative issue as well.
Finally, you need to consider assets. Your spouse may have considerable assets. That is positive, but is it enough to overcome the negative issues? They must have considerable assets to make it a positive proposition to have them on the mortgage.
Can one person own a house with a joint mortgage?
Yes, one person may own a house while more than one is responsible for the mortgage. The loan is separate from ownership. It is more common for one person to be on the mortgage and more than one on the title. However, there are cases where there is only one person on the title but more than one on the mortgage.
Final Thoughts About Joint Mortgage Requirements
Joint mortgage requirements are the same as those for single borrowers. These loans get more complicated because of the added paperwork. In addition, Trust and responsibility are very important considerations for the people borrowing together.
Business partners need to be clear about how each will contribute to the cost of paying the loan. Often, one partner cannot compensate if the other becomes insolvent or wants to leave the venture. Make sure you agree on what you will do in these cases before you borrow such a large sum of money.
For married couples, most complications arise because of divorce or death. When a spouse dies, the surviving spouse usually does not need to refinance. They continue to pay the loan if they are able. In divorce cases, however, the individuals usually agree to sell the home. Otherwise, one will have to refinance the loan so that only their name is on the mortgage.
