How Getting a Mortgage With a Co-Borrower Affects the Deed

Image of a smiling woman on a house lined street holding the hand of a person while leading them down the street. Captioned: How Getting a Mortgage with a Co-Borrower Affects the Deed

Loan underwriters are hard to please. When a mortgage loan approval eludes the hopeful homebuyer, another signature on the papers might be the only way to move forward.

Why Will a Lender to Refuse to Approve a Mortgage Loan?

The reasons can be several:

  • The hopeful buyer does not have enough credit history.
  • The applicant has not had any (or enough) W-2 income for the past two years. Lenders balk at 1099 and independent contractor income, so it’s harder for gig-economy workers or self-employed entrepreneurs to qualify.
  • The hopeful buyer’s debt-to-income (DTI) ratio—monthly financial commitments divided by gross income—is too high. The U.S. Consumer Financial Protection Bureau suggests that borrowers with a higher than 43% debt-to-income ratio can run into trouble making their monthly mortgage payments.

Should one or more of these factors frustrate the loan applicant, the financial backing of an additional person may demonstrate to an underwriter that the loan can be repaid.

Before finding or being an angel, it’s important to know what role the helper will play. The extra person might simply be co-signing—but in all likelihood they’ll actually co-own the home.

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