pros and cons of a joint mortgage loan

Should You Apply for a Joint Mortgage Loan with Your Partner?

When applying for a home, you have the option to apply as a single applicant or jointly. Joint mortgage loans offer some nice perks.

Thinking of purchasing a home with your partner? You have the option to apply as a single applicant or jointly. When you apply jointly, your incomes get combined to increase the loan amount that you qualify for. 

But, your debt and credit scores also get combined and taken into account, meaning that if one partner hasn’t been responsible financially in the past, they could affect your chances of qualifying for a good mortgage loan. So, should you apply for a joint mortgage loan with your partner? Let’s take a look.

Pros of Applying for a Joint Mortgage

Higher Loan Amount

As mentioned, when you apply jointly, both of your incomes are combined, meaning that you’ll be able to qualify for a higher loan amount. If you’re planning on buying a more expensive property, this is crucial. As well, if your credit history is slightly less than excellent, you might be able to benefit from applying with a partner with a credit score close to 800.

Income Tax Rebate

There are tax benefits to applying for a joint mortgage loan as well. Because both of your names will be on the property and you’re both likely to live in the home, you’ll both subsequently benefit from the income tax rebate that comes from owning the home. This includes the fact that you’re able to both deduct the interest you pay on your mortgage and the up to $10,000 of the property taxes and state income or local tax that you pay.

Reduced Debt to Income Ratio

Debt-to-income ratio refers to the amount of debt you have in relation to your annual income. When applying jointly, as long as both of you don’t have high amounts of debt, you’re usually able to lower your debt-to-income ratio by combining your incomes. Imagine, for example, if you make $80,000 a year but have $30,000 in debt. If your partner makes $50,000 a year but has no debt, adding them to the application will increase your overall income and lower that ratio.

Cons of Applying for a Joint Mortgage

Issues with Credit Scores

Perhaps the biggest issue with joint mortgage applications is the fact that partners don’t always have the same credit scores. If your score is 750 and your partner’s score is 580, that’s going to be a problem that will hurt your loan application. Or, if you have a credit score of 650, which is already somewhat low, and your partner’s isn’t much better, it’s going to look worse. This is why it’s so important to talk about each other’s credit scores and encourage each other to improve your credit score well before you’re ready to apply for the mortgage loan.

Making On-Time Payments

As both of your names will be on the loan, both of you are liable for making payments. If one of you falls behind, you’re responsible for picking up that slack. This means that if you apply for a joint loan together in order to take out a larger loan for a bigger house, you need to be sure you’re both very financially stable. If one of you switches careers in five years and is out of work for a year, the other will still have to pay for that partner’s loan obligations in full.

Monitoring Your Credit with Float

Have you noticed just how important credit scores are in the loan application process? If you’re planning on applying for a joint mortgage loan then we suggest you start monitoring your credit now. Get a copy of your credit report and find out what’s hurting you the most. Start to address those issues at least 90 days if not a year before you’re ready to apply for the loan.

With Float Credit, you’re able to go on that credit monitoring journey with your partner. We’re the only app that lets you monitor your and your partner’s credit reports with complete privacy control. You’ll also be able to access tips and tricks that’ll help you increase your score, as well as gain access to our loan marketplace.

Ready to start preparing for your future? Download Float Credit today.

About the Author – ELIZABETH THORN

After receiving a degree in film from UCLA, Elizabeth left Los Angeles to travel the world and focus on storytelling and content creation. She has since worked as a freelancer and staff writer for publications in Europe, Asia, and North America, namely in the areas of travel, tech, finance, and business.

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