Some of us dream of shacking up with our spouse, partner, relative or best friend and joining the modest group of homeowners under 35 and having a place to truly call your own. But when it becomes evident that your low credit score is deterring mortgage lenders, that dream may become filled with regret and hopelessness. Perhaps your debt-to-income ratio is not ideal. Or maybe you have maxed out credit cards and unpaid student loans that have scarred your credit report and as a result you’re unable to co-sign the mortgage for the home you plan to purchase with your partner. However, there are still some loop-holes in place that will still allow you to become a homeowner.
You Can Still Be on the Property Deed
If your partner’s credit and financial history are outstanding, he or she may be able to qualify for the mortgage loan on their own. This effectively shields you from legal financial responsibility for the mortgage. Even though you aren’t on the mortgage, it doesn’t prohibit you from co-owning the home. Your signature might not be on the mortgage, but you can still sign the deed, making both you and your partner owners of the home.
Can You Legally Be a Co-owner If Your Partner is the One Paying the Mortgage?
If you’re on the deed, you’re an owner. Although your partner is individually responsible for the mortgage on the house you two are sharing, it doesn’t mean that you can’t contribute on your own terms. After finalizing the mortgage terms with your loan officer, you and your partner can decide on the best solution for both of you on ways to pay down your mortgage loan.
If You’re Not on the Mortgage at First, You Can Still Get on It Later
If you’re not on the mortgage at closing that doesn’t mean that you can’t be added to it at a later time. For example, five years post-closing, you may have had time to rebuild your credit, putting you in a good position to refinance yourself into the mortgage at a lower interest rate. However, if your partner’s financial history merited an unbeatable mortgage rate, your improved credit score may not have improved enough for your combined finances to beat your partner’s individual rate. You have to weigh your options — adding yourself to the mortgage may not be the best decision if it doesn’t ultimately lead to a lower interest rate. If your combined finances will allow for a lower interest rate but you still can’t be added to the existing loan, consider refinancing and taking out a new shared mortgage.
Becoming a homeowner is a feat in itself. Without legal documentation for the shared housing expense, things can get messy. But this agreement doesn’t have to be complicated. Having a solid plan of action with your partner can help:
- Know your co-owner’s credit history.
- Be transparent regarding your finances.
- Write out a contract. It should detail expectations of shared expenses including any contributions to the mortgage payment from the non-purchasing party and any other terms of ownership, expense-related or otherwise.
With this knowledge, you and your spouse, partner, relative or friend can be well on your way to becoming happy homeowners.
By Christal Bunch Copyright 2016 Brass Media, Inc.