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Key takeaways
- A co-borrower on a mortgage shares ownership of the property and responsibility for making mortgage payments.
- Adding a co-borrower to a mortgage can increase your chances of approval, get you a better rate, and allow for purchasing a larger or more expensive home — assuming their financials are better than yours.
- To remove a co-borrower from a mortgage, you’ll likely need to refinance the loan or sell the home.
For many people, the decision to add a co-borrower to a mortgage is a no-brainer. For example, if you’re married or have a long-term partner, it likely makes the most sense to take out a joint mortgage. It acknowledges your shared interest in and responsibility for the property.
But what if you’re planning to buy a home solo? If you’re concerned about your ability to qualify for a mortgage, adding a co-borrower with a strong financial background — whether a relative, a friend or someone else — could increase your chances of getting approved. That said, if you don’t want to share the equity or decision-making about the property, it’s probably not a good idea.
Here’s what you should know about adding a co-borrower to your mortgage.
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 both of your qualifications, including assets, credit history and income.
As co-borrowers, you’re both responsible for the home loan. That means you both have an ownership interest in the home, both of your names are on the property title, and you can both accumulate equity. On the other hand, if one or both of you stop making mortgage payments, both of your credit scores will take a hit.
How can a co-borrower affect your qualification for a mortgage?
When reviewing the credit scores of co-borrowers, a lender may take one of a few different approaches:
- Median score: A lender might 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. Fannie Mae, the government-sponsored entity that backs conventional mortgages, has used this method in its underwriting software — which many lenders also use to approve applicants — since 2021. In this case, a co-borrower with a higher score improves your application’s risk profile.
- Lowest median score: “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. On its website, online lender Better says it uses this method.
- One score weighted more heavily: Some non-conforming loans weigh the median score of the occupying borrower more heavily, according to Shayowitz. And Mark Worthington, an Oregon-based branch manager with national lender Churchill Mortgage, explains, “There are a few non-QM mortgage companies that look at the primary wage-earner’s median score only.”
Even if the lender looks at the lowest credit score alone, a joint mortgage can still have advantages. The extra income and assets a co-borrower provides can lower the overall debt-to-income (DTI) ratio of the application, helping you to get a bigger loan, a better interest rate or making it easier to qualify in general.
Who can be a co-borrower?
The following types of people can be co-borrowers 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.
Co-borrower vs. co-signer
There are multiple ways you can apply for a mortgage with another person. You may choose a co-signer approach, in which the other person doesn’t have their name on the title — unlike in a co-borrower relationship — but he or she is responsible for repaying the loan.
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.
Types of co-borrower relationships
| Type of co-borrower | Relationship | Financial disclosures? | Listed on title? | Responsible for paying the mortgage? |
|---|---|---|---|---|
| Co-borrower | Spouse/partner/friend/relative | Yes | Yes | Yes |
| Co-applicant | Friend/relative | Yes | Yes | Yes |
| Co-signer | Friend/relative | Yes | No | Yes |
| Guarantor | Friend/relative | Yes | No | Only if primary borrower can’t pay |
| Title holder | Spouse/partner, friend/relative | Yes | Yes | No (if they’re not also on the mortgage) |
Having a co-borrower isn’t the only way you can get financial assistance toward a mortgage. For example, you could receive a gift of money toward your down payment or closing costs without including the giver on your application. You will need to provide your lender a gift letter, though.
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 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 the primary borrower 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. This person may become the main point of contact for the lender.
When is a co-borrower a good idea?
It may make sense to add a co-borrower if:
- You and the co-borrower have an equal partnership in the property and both benefit from the loan.
- Your co-borrower has strong finances, little debt and a good credit score — possibly better than your own.
Co-borrowing a mortgage works best when both parties want their name on the title and agree to share the responsibility of paying back the loan. It’s typical for partners or spouses who reside in the 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 on 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.
If your co-borrower is a spouse or partner, you may want to remove them from the mortgage if you’re splitting up. If it’s a friend, you may decide that you no longer want to live together, or if it’s a parent, you may find you no longer need their support.
However, one of the downsides of using a co-borrower is that you must jump through a few more hoops to end the relationship. Lenders are reluctant to approve these arrangements, since it can increase their risk and cut into their ability to collect payments from both parties. And if one of you wants to keep the home, you must make payments on your income alone.
Still, it is possible. Here are a few options:
- 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. “In order to remove a co-borrower from the loan, it most often takes an entirely new loan via a refinance,” Worthington says. Again, you’ll need to have good credit and sufficient income and equity to qualify without your co-borrower — and you’ll pay a new set of closing costs.
- Transfer your mortgage. If your mortgage is an assumable loan, you should be able to release a co-borrower and transfer your mortgage to yourself alone. Your lender will need to review your credit, and there may be fees.
- Sell the place. If you’re not attached to the property — say it’s an inheritance — 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. Improving your credit can increase your chances of getting approved for a loan or receiving 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.
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