A trust deed, also known as the deed of trust, is a mortgage loan document used in some states. The lender provides the trust deed to explain the terms and conditions of the loan, and also to secure the property as collateral. The trust deed functions to place the property's title into a trust, controlled by a trustee. If you should default on the loan payments, the trustee handles the foreclosure process and auction sale on behalf of the lender. Once your mortgage loan closes and the trust deed is signed, you cannot simply add another person as a borrower. You need to refinance the loan to accomplish this.
Talk to the other person about his current financial situation. He'll need to disclose his annual income and total debt, including student loans, credit cards, auto loans or other mortgages. Order a credit report for both of you. Everyone is entitled to one free report per year from the three reporting bureaus, provided by annualcreditreport.com, or you can purchase a report and credit score information from one of the bureaus --- Equifax, Experian and TransUnion -- or myfico.com. You'll both need to have good credit, and your combined debt-to-income ratio shouldn't be more than 36 percent.Step 2
Contact your current mortgage's lender about refinancing options. You don't have to use the same lender to refinance your home loan, so shop around for the best loan options. You can apply with a few lenders within a 30-day period and your credit score won't get a negative mark. The bureaus understand that you're looking for the best offer.Step 3
Complete the formal loan application provided by the lender of your choice. Both you and the other person will need to answer each question entirely. You will also both need to provide proof of income for the lender, such as a pay stub or tax return. Wait for the lender to process the application, including the title search and appraisal, then provide an approval decision.Step 4
Decide how you will hold the title to the property. Because you're adding an additional borrower, he'll become an owner and the mortgage lender will provide a deed for you to sign. There are various ways to hold title, such as joint tenants or tenants in common.Step 5
Sign the loan documents at the closing meeting. This meeting will basically be the same as the closing for your original mortgage, except the new borrower will sign the paperwork as well.
- Deciding how to take title is an important step because it can have implications on the future of your share of the property after you die. Joint tenancy is generally used by married couples. With this form of ownership, each person owns the property equally and has a right of survivorship. If one owner dies, the other is automatically granted full ownership regardless of what the deceased owner's will instructs. The tenants-in-common form of vesting is suited more for unmarried people. In this vesting, each owner holds a separate share and can determine who the share is passed to upon death.
- If the person you want to add to the trust deed doesn't have good credit or carries a high amount of debt compared with income, it might not be beneficial to add him or your application might not get approved.
- FHA: FHA Streamline Refinancing Rules for Adding/Removing Borrowers
- Federal Reserve Board: A Consumer's Guide to Mortgage Refinancings
- FHA: The Difference Between a Co-Borrower and a Co-Signer
- Escrow Help: What Is The Difference Between A Mortgage And A Deed of Trust?
- Viva Escrow: Notes and Deeds of Trust
- US Legal: How Would I Add Someone to the Deed of My Home?
- Mortgage Loan: Newlyweds -- Merge Your Assets With A Mortgage Refinance