Here Is Why You Should Not Have Two Names on the Mortgage

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Here Is Why You Should Not Have Two Names on the Mortgage

Buying your first home is a very important milestone in your life. Additionally, buying a home with your partner can be even more exciting. However, please note that if you plan to take on a mortgage, the decision can affect you financially over a long period.

Difference Between a Mortgage and a Title

A mortgage is an agreement that you make with a lender. It states the amount that you borrowed, as well as the repayment terms. On the other hand, a title is your right to ownership. It is important to note that if you and your partner decide to have your names on both of these documents, it does not mean that you split home ownership 50/50.

How Does a Mortgage Work for Co-Borrowers?

The 2018 NAR Home Buyer and Seller Generational Trends Report stated that 88% of Americans acquired a mortgage to finance the purchase of their home. If you and your partner choose to co-borrow, there are some factors that you must know.

  1. Lenders will evaluate you and your partner separately. First, they will take your FICO scores from the three credit-reporting agencies. Then, they will review these three scores and find the mid-value. The same will be done for your partner. Whichever mid-value score is lower between the two of you is the score that you should use for your joint loan application. So, having only one strong credit score does not work in your favor.
  2. A low credit score equals a higher interest rate, and a single income equals a lower qualifying loan amount.

If one credit score is lower than the other, then you need to consider several questions. Think about whether you should apply with the stronger score or whether you should apply with the higher income. To make the right decision, you should meet with a lender and test some loan amounts against your scores and incomes. Then, see which combination works best for your financial situation.

Who Has the Right to Ownership?

After you work out your mortgage situation, you need to decide whose name to put on the title. It is a good idea to have both names on the title before you close. Not all lenders will be willing to amend the title to add a name, while some might be lenient if it is a family member.

Remember, the name on the mortgage is the person who is responsible for ensuring the payments on the loan. The names on the title represent the owners of the home. So, make the decision that is in your best interest.