Some people have problems getting approved for mortgages because they lack sufficient verifiable income or have low credit scores. Adding a family member to a mortgage can help the income part of the equation. However, each applicant must have good enough credit to meet the lender's requirements, so simply adding a family member to a loan does not negate the need for the primary applicant to have good credit. Lenders have different rules about adding relatives to mortgages, so loan applicants should check with the lender before applying for a home loan.
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Find a family member who is willing to sign on the loan. Do not add someone with low income and high debt levels. Only add a relative who can help and not hinder the application; ideally someone with high income and minimal debt is the best candidate. Make sure this relative understands that you both will be equally responsible for paying the debt.
Contact the mortgage lender and find out if you can add a family member without an ownership stake in the house to the loan. The Federal Housing Administration allows borrowers to add family members who are not listed on the deed to a mortgage -- but only if that relative lives at the house. Some lenders do not let family members who are not owner's of the home borrow against it, while other banks allow family members who neither own nor live at the home to sign on the mortgage.
File a quit claim deed to transfer ownership of the house from you to both the family member and you if you are required to do so in order to get the loan approved. If you cannot get a loan by yourself but do not want to add the family member as an owner of the home, then try another lender with less strict underwriting guidelines.
Provide the lender with two months of bank statements, two years of W2s and two recent payslips for both you and the family member who intends to sign on the loan. Both of you must consent for the lender to check your credit and must provide any other documentation requested by the bank. If approved, you and your relative can sign the loan documents.
Tips and warnings
- If you add a family member to the deed of the home, you relinquish total control of the property and cannot sell it, rent it or make changes to it without that person's consent. Additionally, all owners are entitled to a share of proceeds from the home if you sell it.
- Family members who cosign on loans are responsible for settling the debt even if they neither live in nor own the home. If the debt goes unpaid, the creditor can pursue the applicant and co-signer in court -- and the credit scores of both parties will suffer.
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