What First Time Home Buyers Should Know about Joint Mortgage and Ownership

Joint mortgage ownership options allow a couple to share the burden of paying off a home loan. Since most married couples share their financial responsibilities, this allows them to additionally share the burden of a home loan as well as the rewards of ownership. The two parties will be viewed essentially as one on the loan contract, making this is an important decision.

Incomes are Combined

When you apply for your joint mortgage, the biggest advantage is you get to combine your two incomes to list one larger household income. Your mortgage lender will be considering your income as a large part of deciding whether or not to lend to you. This is especially true for first time home buyers who do not have an established mortgage or loan history. Your income to debt ratio is essential to show lenders you have enough funds available to make payments. Applying jointly allows you to get a larger loan.

Debts are Shared

Debts are also shared between both parties on the mortgage application. This means you will have to list all debts incurred by either person on the application. For example, if a co-borrower has a student loan, this will appear on the mortgage application. Even though the original borrower will retain sole responsibility to pay for that single debt, the debt is a household debt in the eyes of the future lender. Couples with high incomes and low debts are quickly approved for good mortgage rates.

Credit Remains Independent

When you enter into a joint debt, you do not also merge your credit scores. In fact, even marriage does not cause the merging of two people's financial records. You will be using your separate credit scores on the application. After the loan is paid off, both parties will see a difference on their individual scores.

Lenders will use the lower of the two credit scores in any application. Since your rate is partly based on credit scores, it is important to maintain a good credit history. If one spouse has a 760 credit score, which is considered good-but the other a 620 credit score, which is considered poor-the application as a whole will be weighed heavily by the 620 score.

Death and Divorce

Your joint mortgage may be terminated at any point by refinancing or modifying the loan. However, the most common reason to terminate a joint mortgage is the death of one of the persons or the divorce and separation of the couple. In the case of a death, the person who has passed away has no further obligation to the mortgage debt, and ownership of the home is passed solely to the surviving individual. Your state may have different laws requiring for the passing of the home's deed to be handled in probate court. When a separation or divorce occurs, the situation is trickier. The parties must decide whether they will keep the house and the mortgage.