Can 3 people buy a house together? Yes they can, but the process is a little different. This guide breaks down what to expect.
Joining forces with others for a common cause can lead to better outcomes than going it alone. Case in point: buying a house, especially if you have a low credit score, limited credit history, or limited income.
Getting another co-borrower or co-signer to join you in the transaction can improve your chances of securing a mortgage loan and get a competitive interest rate.
Purchasing a home with multiple people on the mortgage loan is becoming more common. Friends, family members, and unmarried couples often decide to buy real estate together. But how many borrowers are allowed on a single mortgage?
While there’s no set legal limit, most lenders do cap the number of people that can apply for one loan. Understanding these lending guidelines is key to putting together a successful joint home purchase.
In this comprehensive guide, we’ll explain everything you need to know about getting a mortgage with multiple borrowers.
Why Add More Than One Person to a Mortgage?
There are a few scenarios where having more than one borrower on a mortgage loan can make sense:
- Married couples – Spouses commonly apply together, even if only one will be on the home’s title
- Unmarried partners – Domestic partners who aren’t married often still want to buy property jointly
- Investors – Co-investors may purchase an investment property or vacation home together
- Family members – Parents/children or siblings combining resources to afford a larger home
Adding another borrower can strengthen the loan application if they have good credit, steady income, and down payment funds However, any financial weaknesses they have can also negatively impact your chances.
How Many Co-Borrowers Are Typically Allowed?
Most conventional lenders allow no more than four borrowers on one mortgage loan. The limit for government-backed FHA, VA, and USDA loans is also usually four borrowers.
Lenders cite software limitations as the reason, The automated underwriting systems used to evaluate loan applications are designed for individual borrowers or joint spouses Adding more data fields complicates the process
Some smaller lenders may still manually underwrite loans with more than four borrowers. But your options will be more limited than going with a major mortgage lender.
What if I Form an LLC With Co-Buyers?
Purchasing an investment property via a limited liability company (LLC) with multiple members is another scenario. The LLC itself can apply for the mortgage loan if properly established.
Forming an entity like an LLC does complicate the lending process, however. Not all lenders are willing to provide financing to LLCs, trusts, or partnerships. Be sure to ask potential lenders if they work with LLC borrowers before starting the application.
Joint Mortgage Loan Application Process
To apply for one mortgage with multiple borrowers, each person must complete a full loan application and provide financial documentation. This typically includes:
- Identification
- Income verification
- Tax returns
- Bank statements
- Debt and credit report details
The lender will evaluate the credit scores, income, assets, and debts of each applicant. All borrowers must also sign disclosures and agree to a credit check.
Can I Later Remove Someone From the Mortgage?
Yes, it is possible to remove a person from an existing mortgage, but it can be challenging. Options include:
- Refinancing in your name only – You must qualify based on your finances alone
- Selling the home – Any loan balance is paid off from sale proceeds
- Assuming the loan – Possible if loan is assumable, but difficult to arrange
To refinance or assume the mortgage, you’ll likely need the other borrower’s cooperation to sign a quitclaim deed removing them from the home’s title.
Tips for Buying With Multiple Borrowers
If you’re considering a joint home purchase, keep these tips in mind:
- Discuss financial goals, budgets, and exit strategies in depth beforehand
- Consult professionals – real estate attorney, mortgage officer, accountant
- Compare pros and cons of having multiple borrowers on one loan
- Review title and ownership structures – tenancy in common, joint tenancy, LLC
- Make sure your lender allows for multiple borrowers
- Check if mortgage amount changes with additional applicants
Buying property with others requires careful planning and coordination. But it can open the doors to homeownership if planned properly.
We Can Help Guide Your Joint Home Purchase
If you want to buy a home together with family, a partner, or friends, we’re here to help. Our experienced mortgage officers can explain options for structuring a joint purchase and loan application. We’ll help you determine the smartest approach to make your shared homeownership dream a reality.
Contact us today to explore your options for purchasing a home with multiple borrowers!
Why would 3 people want to buy a house together?
â[Co-borrowing] allows people to cohabitate so that they can buy a bigger home or a better investment than they can afford if they were buying on their own,â DiBugnara said.
Craig Luedtke, director of title operations for Chicago-based Landtrust Title Services, explained that co-borrower arrangements come in handy for several different scenarios.
âOften, two people who may be friends or an unmarried couple will decide to purchase a property, but a third borrower, or co-signer, is needed for the signing of the promissory note,â he said. âFor instance, two parents of a borrower may also need to be on the mortgage and title for the transaction to proceed.â
Another example would be if two sisters choose to purchase a property together but also want their mother to be on the title.
âHere, the motherâs creditworthiness isnât required for loan approval,â Leudtke continues. âAll three would need to be named on the deed with desired tenancy, whether or not the mother is on the note. Because the mother is going into title on the deed, all three would need to be named as co-borrowers/mortgagors on the loan.â
What to consider before buying a home with multiple people
Purchasing a home with multiple co-borrowers may help cinch the financing, but it can lead to complications later. For example, what happens if one party wants to sell the home but the other two parties want to stay put?
âBefore buying a home with multiple people, the group must consider how ownership and equity will be shared, maintenance responsibilities, and how and when they can sell the property,â said Khari Washington, a real estate professional in Riverside, Calif. âIf these factors are not discussed ahead of time and preferably put in writing, the investment could challenge their relationships with each other.â
How and when the group can sell the property will depend on the legal ownership structure created for the investment. Thatâs why experts recommend drawing up and signing a legal contract, with the help of an attorney, when multiple co-borrowers are involved.
âMany ownership structures require all parties to agree to sell before they can unload the property. Other agreements need a simple majority of the owners to agree to sell. Additionally, some agreements allow a person to sell their interest in a property or for the other owners to buy that interest,â Washington explained.
How Do Mortgage Lenders Determine The Loan Amount?
FAQ
Can you have 4 borrowers on a mortgage?
How many people can be on a mortgage?
How many co-signers can be on a mortgage?
How many people can you out on a mortgage?
How many people can apply for a mortgage?
It’s rare in the U.S. for a lender to consider a mortgage application from more than four or five individuals.
Can you have 3 people on one mortgage?
Yes, you can have 3 people on one mortgage. The co-borrowers can pool their resources to meet the lender’s requirements. With that, it may be easier to qualify for the loan. Check your home buying eligibility. Start here (May 14th, 2024) Dawn Papandrea is a writer specializing in personal finance.
How many co-borrowers can you have on a mortgage?
There’s no legal limit to the number of co-borrowers on a mortgage, but lenders rarely take applications from more than four or five borrowers due to limits on underwriting software. Applying for a mortgage with multiple co-borrowers can allow you to get a bigger loan, but things can get complicated when multiple borrowers are listed on a mortgage.
How many borrowers are allowed on a conventional mortgage loan?
As a rule of thumb, no more than four borrowers are typically allowed on a conventional mortgage loan. Conventional loans (which comprise about 90 percent of mortgages in the U.S.) are backed by the government-sponsored agencies Fannie Mae, Freddie Mac and Ginnie Mae.