How many people can be on a mortgage?
Key takeaways
- While there is no official maximum number, lenders generally accept no more than four borrowers on a conventional mortgage.
- Each borrower will need to complete an application, submit supporting financial documentation and agree to a credit check by the lender.
There are several reasons why two or more people may want to buy a home and be on the mortgage together. The most common case is that of a married (or cohabiting) couple. Non-espoused people may also want to purchase collectively. They could be related — siblings or parents and children setting up a multi-generational home — or just friends.
But how many people can be on a mortgage? Here’s what you need to know about buying a home with multiple borrowers.
How many people can be on a home loan?
There’s no actual legal limit as to how many people can be on a home loan. However, getting a bank or mortgage lender to accept a home loan with multiple borrowers might be challenging. As a rule of thumb, no more than four borrowers are typically allowed on a conventional mortgage.
Keep in mind: Conventional loans (which comprise most mortgages in the U.S.) are backed by the government-sponsored agencies Fannie Mae and Freddie Mac.
It’s due to computer software. Fannie Mae’s automatic “Desktop Underwriter” tool — which many financial institutions use to evaluate mortgage applications — only supports four borrowers. If there are more than four applicants, the lender would have to manually underwrite the mortgage. Many big banks don’t do this anymore: It’s all automated these days. So your financing options would be slimmer, and you might need to go to a credit union or community bank instead. Or perhaps an online lender.
However, four seems to be the magic number with many mortgage companies. “Quicken Loans allows a maximum of four clients on any single loan transaction,” says Bill Banfield, chief risk officer for Rocket Mortgage (which owns Quicken). “The exception to that rule is VA loans. National VA loan guidelines permit only the veteran and his or her spouse to be on the mortgage.”
Pros and cons of more than one name on a home loan
There are several different scenarios in which multiple people might want to purchase a home together and have a joint mortgage.
For instance, if you are married, it makes sense to put your name and your spouse’s name on the loan, especially if you are both going to own the home. Or, if you are not married but cohabit with a permanent partner.
Another example is if you purchase a home with an investor partner: You will live in the house as your primary residence, but your co-investor will not. However, they will share in homeownership costs as well as proceeds from the future sale of the home.
Pros of of having multiple names on a home loan
- Easier qualification: Applying with a co-borrower might make it easier to qualify for a loan because two incomes are better than one. If the co-borrower has good credit and a steady job, for example, this can help strengthen your application and improve your chances of getting approved. It might be easier to make a larger down payment with more than one borrower, too.
- Co-borrower’s name on the title: Applying with a co-borrower allows you to put their name on the title. This is important if you plan to jointly own the home. (Note there is also another way to add someone to the title if you want to avoid going through the underwriting process: a quitclaim deed after the closing).
- Shared costs: Having multiple names on the mortgage allows you to share costs, making homeownership more affordable.
Cons of of having multiple names on a home loan
- Potential credit impact: Co-borrowers are both wholly responsible for loan payments. If one borrower stops paying their share of the loan, the other must continue to pay to avoid damaging their credit or losing the home to foreclosure.
- Shared decision-making: It can be challenging to agree on homeownership issues, including who is responsible for maintenance and repairs and what to do if one person wants to sell the home but the other does not.
Tips for buying a home with multiple people
Before you agree to a mortgage with other people, protect yourself and consult with a business or real estate lawyer who can explain your options and outline the risks you face.
Obtain legal advice
“Contact an attorney to work out what type of entity is going to take title to the property,” says Jim Finn, an attorney at Gregg, Hunt, Ahern & Embry in Cambridge, Massachusetts. “This could be an LLC, a corporation, a trust or a partnership. Once you decide what would work best for your particular situation, then the attorney can draft the legal documents.”
Form an LLC
If you’re going in on an investment property with a few friends or family members, forming an LLC can protect members from liability if there’s a dispute or lawsuit, or if someone stops paying the mortgage or wants to sell the property.
“If it’s an investment, I would suggest they do an LLC because that’s going to give them insulation from personal liability,” says Finn. “They would have an operating agreement which would spell out how they’re going to split proceeds and share costs.”
Check with lenders first
Before you form an LLC, however, make sure your lender is open to giving joint mortgages to LLCs or similar entities. “Some lenders do not want trusts or LLCs to be on the mortgage; they want individuals,” says Finn.
How to apply for a mortgage with multiple borrowers
You can get a joint mortgage between two or more parties over the age of 18 if the lender allows it. Each person must submit a loan application, and the lender will run a credit check on each applicant. Along with considering your joint debt-to-income (DTI) ratio, the lender will likely ask for additional documentation, such as proof of income, other debts you may have and employment history. All parties must attend closing day together.
How to remove a name from a mortgage
It’s possible to remove a name from a mortgage, but that doesn’t mean it’s easy. Most lenders won’t be excited by the removal, because it means there’s now one less person to pay the loan back.
If the lender is willing, though, you’ll likely have to re-qualify for the loan on your own. If you have an assumable loan, this process can be a little bit easier.
Another option is to refinance the mortgage without the co-borrower. Of course, you’ll need to qualify for a refinance, just like any other mortgage.
You can also try to sell the home. You’re then free to purchase another place without a co-borrower. Of course, you’ll have to pay any outstanding balance on the mortgage out of your proceeds.
Bottom line
Now you know how many people can be on a home loan. But remember, it’s important to understand exactly what you’re getting into before committing to an arrangement with multiple borrowers. Even though this arrangement may make sense for you today, it could lead to complications down the road — especially when you have to make important decisions about the property, including possibly selling it.
For best results, discuss with a Realtor or real estate broker the ins and outs of buying a home with someone. And definitely consult a real estate attorney before entering into a purchasing pact with another buyer.
