Tips for Buying with Co-Borrower

If you’re looking to apply for a mortgage and buy a home, there are several scenarios that could play out during the whole process.  Choosing whether or not to buy with a co-borrower is one of them and it’s not entirely a no-brainer situation.

Buying with a co-borrower is a great way to improve your overall stock as a prospective homebuyer and could potentially give you a larger line of credit and better interest rates from which to draw when purchasing your home.

With that said, here are our tips for buying with a co-borrower.

Understanding Co-Borrowership

A co-borrower is different than a co-signer.  Both are extremely important aspects of getting a mortgage but operate in completely different ways.  A co-signer is essentially on the hook in the event that the primary applicant defaults on the loan and effectively has no ownership in the home.  A co-borrower, however, has equal ownership of the new home with the primary borrower.

That said, it’s important that if you’re choosing to go the co-borrower route that the person you’re borrowing with is a domestic partner, spouse, or close business partner.  While it’s not entirely necessary to have co-borrower, in most marital situations, the spouses will apply for a mortgage as such in order to realize the best interest rates and mortgage credit possible.

Do You Have to Apply as a Co-Borrower?

Even if you’re married or have a long-time domestic partner, you don’t have to apply for a mortgage as co-borrowers.  As a matter of fact, there are certain situations where applying as a single applicant could be advantageous.

For example, if one borrower has excellent credit and another has bad credit, it might make sense that the borrower with the better credit put their name on the application and paperwork.  On the other hand, borrowing together could increase the amount of money you get for a mortgage and could prove a strong case for your trustworthiness as a borrower.

Your lender can help guide you through different scenarios and decide what is right for the two (or more) of you.  Lenders can often run the numbers individually or jointly to see what the best application situation is.

Co-Borrowing With More Than Two People

Most homebuyers see co-borrowing as a married or domestic partner situation; however, there are instances where co-borrowing with multiple borrowers actually makes sense.

These situations would largely involve ones where investment or vacation property is the subject.  In these situations, it might make sense for all of the stakeholders involved to co-borrow on the loan.  Additionally, more borrowers can mean some favorable terms such as lower down payment requirements and overall lower interest rates as the risk is spread among more people.

Learn More About Co-Borrowing

In order to learn more about co-borrowing, it’s important to speak to a lender.  Lenders are experienced with all sorts of different situations that necessitate clarification or best practices to get the best possible rates and optimal credit values to borrowers.

If you’re interested in learning more, then contact a loan officer at Tidewater Mortgage Services Inc.  Tidewater’s 20-plus years in the mortgage industry has seen virtually every borrowing scenario play out, so don’t hesitate to get in touch!

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