How many people can be on a mortgage?

Understanding mortgage borrower limits

Legally, there is no limit to the number of people who can be on a mortgage. However, finding a bank that will accept more than four or five signers may be difficult. The reason is that the two most common tools used to process applications are limited in the number of signers they can accommodate. For example, Fannie Mae’s Desktop Underwriter allows four signers, while Freddie Mac’s Loan Product Advisor allows up to five.

If you have a large number of signers, there are other complications as well. If co-borrowers are going to be responsible for part of the payment, you have more risk that someone will have trouble keeping up their end of the bargain.

You'll also want to consider what happens if one of the signers wants their name removed later, wants to sell the property or dies. The more people on the mortgage, the more life circumstances can complicate matters.

Benefits of having multiple borrowers

The main benefit of having multiple borrowers on a mortgage is that it reduces the lender's risk, thereby making it easier to secure the best terms. The co-borrowers' incomes will be included in the application, making it stronger than it would be otherwise.

If the co-borrower is contributing to the down payment, it could mean being able to buy a house sooner. A larger down payment will lower the monthly mortgage payment. If the co-borrower is contributing to the mortgage payment, it may enable the purchase of a more expensive home.

More buying power

Since all co-borrowers' incomes are considered when applying for a mortgage, having more people on the loan can increase your overall buying power.

For example, if you have an income of $100,000, you may qualify for a mortgage of around $300,000. But if you add a co-borrower, who also has an income of $100,000, you may qualify for a $600,000 home together.

If the co-borrower is contributing to the down payment, that can help out even more. It may allow you to qualify for better loan terms or have a smaller monthly payment.

Risks of multiple borrowers

There is a risk that your co-borrowers will not be able to fulfill their responsibility, and you will be on the hook for the whole mortgage. If you do not make the entire payment and the loan defaults, your credit scores will be equally affected.

All co-borrowers are assuming legal liability for the full mortgage

Once the mortgage is approved, your personal debt-to-income ratio may be negatively affected since the total mortgage payment could be considered your responsibility. For example, if your income is $4,000 and the mortgage payment is $2,000, your debt-to-income ratio would be 50% (assuming no other debts), even if in reality you are only paying half the payment.

"The full amount impacts their DTI ratios. Sometimes, if you can prove they don't pay for a period of time, 12 to 24 months, the new lender can make an exception and not count it in their ratios,” H. Jack Miller, the president and CEO at Gelt Financial, a commercial mortgage lender based in Boca Raton, Florida, explained.

Lastly, you will be tied to your co-borrower for the life of the loan. You'll have to make decisions together, and if you have a dispute regarding the loan, it may impact your relationship.

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Potential credit impact

The more co-borrowers there are, the more likely it is that something will come up for one of the borrowers that will affect their ability to make the payment. If the full payment is not made on time, everyone's credit will be affected. A single late payment can remain on your credit score for up to seven years. Several missed payments in a row could mean foreclosure on the property, further damaging your score.

If one of the co-borrowers can't make the payment, the others must pick up the slack.

A late mortgage payment will show up on all signers’ credit reports, Vandenberg explained. "Each is equally responsible, even though they may not be able to make the payment alone,” he said.

If you have a mortgage with a co-borrower, ensure that you are keeping track of the payments being made. Additionally, have funds set aside in case you need to cover your co-borrower's portion of the loan for a period of time.

Requirements for joint mortgages

The requirements for joint mortgages are similar to single-signature mortgages. As a group, you'll need to qualify for the mortgage based on credit scores, debt-to-income ratio and down payment.

It's important to note that a co-borrower must also be added to the property's title. If they are not being added to the title, then they are considered a co-signer instead.

Credit score

You'll need a credit score of at least 620 for a conventional or VA loan. However, FHA and USDA loans have more leniency. FHA loans require a credit score of at least 500, and you can qualify for a USDA loan with a credit score of 580.

Some lenders will use the lowest credit score of all the co-borrowers for the application. If your co-borrower has a low credit score, it may make it more difficult to get approved. Lenders will look at your credit scores from the three credit bureaus and take the middle score.

For example, if you have credit scores of 705, 683 and 695, your credit score will be considered to be 695. If your co-borrower's middle score is 650, lenders will use 650 to process the application.

However, Fannie Mae requires lenders to use the average middle score of all co-borrowers. So it's possible that adding a co-borrower could increase the credit score used.

Debt-to-income ratio

A debt-to-income ratio below 35% is ideal; however, some lenders will accept DTIs as high as 45%. If you are getting an FHA loan, you may be able to have a debt-to-income ratio as high as 50%.

Down payment

For conventional loans, you'll need at least 3% down to qualify for the loan. However, FHA loans require 3.5%. Keep in mind that the larger the down payment, the better. For instance, if you put down less than 20% you'll likely be required to buy private mortgage insurance (PMI). This cost will be added to your monthly mortgage payment.

Pro tip

The larger the down payment, the lower your monthly payments will be, which can be better for your finances in the long term. A larger down payment can also help you get better loan terms.

» TIPS: How to save for a down payment

Applying for a mortgage with multiple borrowers

Applying for a mortgage with multiple borrowers isn't much different than applying alone. Each applicant will need to provide all necessary documents.

1. Gather documents

You and your co-borrower(s) will need to provide documents proving identity, income and assets. You will also need to provide other documents specific to your situation, such as those related to owning a business or having declared bankruptcy. Common documents include:

• Photo ID
• Residential addresses for the past two years
• Social Security card
• Pay stubs for the past two months
• W-2 forms for the past two years
• Tax returns for the past two years
• Checking and savings account statements
• Retirement and investment account statements

2. Get preapproved

Many lenders offer the opportunity to get preapproved for a mortgage. You will supply all your information and receive a tentative mortgage offer based on a soft pull of your credit.

This allows you to see how much you would be approved for and compare offers from multiple lenders without affecting your credit.

3. Apply and sign

When you are ready to officially apply for a mortgage, you can complete your application with the lender of your choice. Carefully review the terms, as they may have changed since your preapproval.

You will be given a closing date. This is where you will meet with the title company and sign your mortgage documents. All co-borrowers must be present at closing.