Should you add a co-borrower to your mortgage?

You’d like to get a mortgage but are worried about approval due to your less-than-sterling financials — and maybe about handling the monthly payments, too. We have one word for you: co-borrower.

Putting an additional person on your mortgage can make sense if it helps increase your chances of getting approved for a loan. But it also means sharing ownership of the property you’re buying. If you’re considering adding a co-borrower to your mortgage application, here’s everything you should know.

What is a co-borrower on a mortgage?

A co-borrower, also referred to as a co-applicant or co-requestor, is an additional person on a mortgage. In a co-borrowing situation, both borrowers complete an application, and the mortgage lender considers your qualifications and those of the co-borrower, including assets, credit history and income.

When reviewing the credit scores of co-borrowers, a lender often will base mortgage interest rate offers on the lowest median credit score among the two co-borrowing applicants. What does that mean exactly? If you were applying for a mortgage as a single applicant, without a co-borrower, a lender would examine your credit scores from all three credit bureaus (Experian, Equifax and TransUnion), in order to come up with your median score and offer a rate based on that median. Similarly, when applying for a mortgage with a co-borrower, a lender will pull credit scores from the three major credit bureaus for each borrower on the application and calculate the median credit score for each applicant separately.

If the scores are close, it doesn’t matter. But if there’s a gap, the impact can be significant, as “most conventional lenders will offer a rate based on the smallest median credit score between the applicants,” says Shmuel Shayowitz, president and chief lending officer of Approved Funding, a regional mortgage banker operating along the East Coast. For example, online lender Better’s website flatly states: “We have to use the lower credit score of you and your co-borrower.”

However, while that’s the most conservative (and common) approach, it’s not the only one. Fannie Mae, the government-sponsored entity that backs conventional mortgages, advocates using the average median credit score of both borrowers, “a better indicator of credit risk than just using the lowest median credit score,” it claims. Ever since 2021, its underwriting software, which many lenders employ to approve applicants, has done just that.

Some non-conforming loans will more heavily weigh the median score of the occupying borrower, according to Shayowitz. And “there are a few non-QM mortgage companies that look at the primary wage-earner’s middle score only,” says Mark Worthington, an Oregon-based branch manager with national lender Churchill Mortgage.

Even if the lender looks at the lowest credit score alone, a joint mortgage still has its advantages. The extra income and additional assets a co-borrower provides can lower the overall debt-to-income ratio (DTI) of the application, helping you to get a bigger loan, or to qualify in general. The lender could sometimes also offer marginally improved pricing based on the combined total income, Shayowtiz says.

Co-borrower vs. co-signer

A co-borrower isn’t the same as a co-signer. With a co-borrower, both you and the co-borrower can have ownership of the property — in other words, both of your names are on the property title — and are responsible for repaying the mortgage.

A co-signer doesn’t have their name on the title but is responsible for repaying the loan. Generally, a co-signer can be beneficial if a borrower needs help from someone with good credit just to get approved for a mortgage. If the borrower fails to pay, the lender has the right to pursue payment from the co-signer.

A borrower might ask their parent to be a co-signer on a mortgage, for example, since the parent’s credit history and added income and assets can increase their chances of securing a loan.

How can you qualify as a co-borrower?

The following types of people can be co-borrowers/co-applicants/co-requestors on a mortgage:

• Spouses
• Domestic partners
• Friends
• Relatives

In general, any adult who’s willing to assume legal responsibility for repaying a mortgage and wants ownership of the property can be a co-borrower.

Each potential co-borrower presents different requirements and liabilities, depending on the type of co-borrower arrangement you choose. For example, a co-borrower or co-applicant will be listed on the title of the home and be responsible for paying the mortgage. However, if you opt for a guarantor set-up, the guarantor is responsible for mortgage payments only if the primary borrower fails to pay.

Types of co-borrower relationships

Does it matter who’s the borrower and who’s the co-borrower?

Since the borrower and co-borrower are equally responsible for the mortgage payments and both may have a claim to the property, the simple answer is that it likely doesn’t matter. In most cases, a co-borrower is simply someone who appears on the loan documents in addition to the borrower.

Some lenders, however, may indicate a “primary borrower.” The criteria for determining who this person is differs among mortgage lenders. Some may define the primary borrower as the person with the higher income, for instance, or as the person whose name appears first on the application.

When is a co-borrower a good idea?

Times when it makes sense to add a co-borrower include:

• When you and the co-borrower have an equal partnership in the property and both benefit from the loan
• When your co-borrower has strong finances and credit score
• When a co-borrower has a lower debt-to-income ratio than you

Co-borrowing a mortgage works best when both parties want their name on the property and agree to share the responsibility of paying back the loan. It’s typical for partners or spouses who reside in the same property to be co-borrowers.

It’s also a good idea if the co-borrower’s financial situation means that you can list additional assets and earned income to your application. A higher income could mean qualifying for a larger mortgage since it indicates to lenders you can make a higher monthly payment.

Can you remove a co-borrower from a mortgage?

The short answer is yes.

However, while it’s possible to remove a co-borrower from your mortgage — if you get a divorce, for example — the process can be somewhat challenging. Lenders are reluctant to let it happen since it can increase their risk and cut into their ability to collect payments from both parties.

Still, you can remove a co-borrower from a mortgage. It may require paying fees (some quite significant) and take some time, but here are a few methods:

• Speak to your lender. The first logical step is to see what your lender can do. Lenders that are willing to remove co-borrowers may require the remaining borrower to re-qualify for the loan on their own. That means you’ll need to have enough income to make the monthly payments and a good credit profile. The co-borrower may also be required to sign a document, such as a release of liability.
• Refinance your mortgage. Refinancing your existing mortgage might be a possible solution if your current lender won’t release your co-borrower. Again, you’ll need to have good credit and sufficient income and equity to qualify.
• Transfer your mortgage. If your mortgage is an assumable loan, you should be able to release a co-borrower and transfer your mortgage to someone else (ideally, you). Your lender will need to review your credit, and there may be fees to pay.
• Sell the place. If you’re not attached to the property (it’s an inheritance, say), selling it and using the proceeds to pay off the mortgage might be an option to release all borrowers from the debt.

Alternatives to a mortgage co-borrower

Borrowers who have poorer credit but don’t want to add a co-borrower to their mortgage could consider the following:

• Establish or reestablish credit. Working on improving your credit can increase your chances of getting approved for a loan or a loan with a more favorable interest rate. Building credit takes time, so be patient. One of the easiest strategies to improve your standing is to make on-time payments on any existing balances or to open a secured credit card and do the same.
• Pay down debt. Paying off your outstanding balances decreases your debt-to-income (DTI) ratio, showing lenders that you have the means to take on a mortgage by yourself without stretching your finances too thin.
• Consider an FHA loan or VA loan. Both the FHA and VA loan programs have less strict credit and down payment requirements, which can help you qualify for a loan independently.

Bottom line on the pros and cons of co-borrowers

One of the pros of using a co-borrower on a mortgage is that you’ll likely have more buying power. A co-borrower can also help you buy a home with a better interest rate if your credit score or debt-to-income ratio needs improvement.

But there are also downsides to consider. For starters, you will both be responsible for the loan, and if the other borrower dies or defaults, you are still expected to make mortgage payments in full. If you purchase a home with someone else and your relationship becomes strained or ends, your financial arrangement will likely get disrupted as well — a problem if one of you wishes to keep the house.

Co-borrower FAQ

• What is the maximum number of co-borrowers you can have on an application?

  In general, there is no limit to the number of people you can add to a mortgage, but most conventional lenders will accept up to four co-borrowers.

• Is a co-borrower the same as a co-owner?

  Yes, a co-borrower is equivalent to a co-owner. When you purchase a home with a co-borrower, both of your names appear on the property’s title. In contrast, when a co-signer applies for a mortgage with you, their name does not go on the home’s title. Their name only appears on the loan and they do not have any ownership claim to the property.

• How does a co-borrower's foreclosure or bankruptcy history affect the mortgage?

  If you have had a bankruptcy or foreclosure in the past, it may be challenging to be added as a co-borrower on a mortgage loan. You must wait at least one year to apply for a mortgage after bankruptcy, but the timeline varies by loan type. If your prior home was foreclosed on, you may have to wait anywhere from two to eight years — again, depending on the type of loan you had. In addition, bankruptcy or foreclosure remains on your credit report for seven years, impacting your ability to qualify for a mortgage.

• Can a co-borrower affect my ability to take out future loans?

  Yes, if they behave irresponsibly. If your co-borrower suddenly decides not to pay back the loan, you will be on the hook for it. If you cannot then pay back the mortgage yourself and default on the loan, it’ll negatively impact your credit score, which could affect your ability to take out future loans.