What if I’m applying with a co-borrower? | Better Mortgage (2024)

FAQs

What if I’m applying with a co-borrower? | Better Mortgage? ›

We have to use the lower credit score of you and your co-borrower. If one of you has a low credit score, we often recommend that the person with the higher credit score apply to get the best terms possible. You'll still be able to put both names on the title.

Adding a co-borrower to your loan application can also help if you lack a credit history. With no credit or a low score, a lender may be hesitant to lend to you. You may be more likely to be approved by having a co-borrower (or co-signer — but remember, they're different), who acts a a guarantor for your loan.

With a co-borrower, both you and the co-borrower can have ownership of the property — in other words, both of your names are on the title — and are responsible for repaying the mortgage. A co-signer doesn't have their name on the property title but is responsible for repaying the loan.

On a joint mortgage, all borrowers' credit scores matter. Lenders collect credit and financial information including credit history, current debt and income. Lenders determine what's called the "lower middle score" and usually look at each applicant's middle score.

Also, the primary borrower might get a lower interest rate than they would without a cosigner. Typically, a cosigner has full legal responsibility for loan repayment if the primary borrower doesn't pay -- even though the goal is for the primary borrower to be the person who repays the loan.

To remove a co-signer, assess your financial stability and ability to qualify for the mortgage alone. Contact your lender to discuss options, which may include refinancing or obtaining a release of liability. Specific steps vary by lender, so consult your loan officer for guidance.

Co-borrowers

Lenders may also offer lower rates and higher loan amounts, especially if both borrowers have good credit. And since each borrower has equal responsibility, you may not need to provide additional collateral to secure the loan.

If you already have a high amount of debt, adding a co-signed loan could impact your own ability to qualify for additional credit. It can affect your credit scores. Because a co-signed loan is recorded on your credit reports, any late or missed payments can have a negative impact on your credit scores.

Since you can't remove the primary borrower as a cosigner, this is one of the easiest ways for them to remove you and keep their vehicle. Ask them to sell the vehicle – Selling a vehicle and paying off the loan with the sale proceeds ends the loan contract.

A co-borrower shares claim over any distributed loan funds or the asset, such as a home or car. Cosigners, on the other hand, don't have any legal claims to money from the lender or the property that the borrower purchases. Another important distinction is that co-borrowers are responsible for recurring payments.

What rights does a co-borrower have on a house? ›

In short, the difference is this: A co-borrower has the same rights and responsibilities as you do when it comes to the loan. This person is equally responsible for making payments but also has equal rights to the loan money.

In the case of a joint application, lenders use both applicants' scores but typically rely more heavily on the lower average of the two scores to determine the terms. This is why a co-borrower with low qualifying credit scores can harm your application.

Although requirements can vary by lender, a cosigner typically needs to have good to excellent credit (670 and up) to cosign a loan or credit line. Lenders look at a cosigner's credit score and report as well as their income and assets to determine whether they qualify for a loan.

So yes! It is possible for a borrower to be on the loan but not on the title of a property. This can occur in situations where the borrower is acting as a non-occupant co-borrower to help a relative or friend qualify for a mortgage, but does not have any ownership in the property.

Contact your lender.

Instead, they will likely make you refinance your home, in effect taking out an entirely new mortgage. Adding a person to your mortgage without refinancing can only work if the mortgage is assumable. Federal Housing Administration (FHA) loans tend to be assumable, but other types may not be.

When you refinance your home, you can add or remove co-borrowers from the mortgage and/or title. Adding a co-borrower can be advantageous in some refinancing cases, particularly if the combined income and assets help you qualify for more competitive rates and terms.

Single Versus Joint Application

When you apply for a mortgage jointly, your incomes are combined, and so are any financial assets that are carried in your individual names. Combining income and assets strengthens your application, making it more likely that you will qualify for the mortgage you want.

A co-borrower can be beneficial for a debtor who is unable to qualify for a loan or favorable loan terms. Having multiple borrowers on a loan can also increase the amount of principal credit approved on the loan. A father, for example, could serve as a co-borrower on a consolidation loan for his son.

Credit Score: If you have a poor credit score, having a co-applicant with a good credit score can help you get the loan approved. However, if you have a good credit score, you may not need a co-applicant. In such cases, having a guarantor can be a better option as it does not affect your credit score.

Pros of co-signing a loan

However, it's also an opportunity to have a positive impact for a borrower in a tight financial spot. For example, co-signing a personal loan allows you to help a young friend or family member build a credit history, thus preparing them to qualify for even more new credit later.