Does It Make a Difference Who Is the Buyer or Co-Buyer for Financing?
It seldom makes a difference who the buyer or co-buyer is when you finance a home, but you might still face some challenges with lenders. If both you and the co-buyer will occupy the home, signing the mortgage and the loan note, you should have no problems. If the co-buyer will not occupy the home, the loan structure will include a non-occupant home buyer. Some loans do not permit non-occupant co-borrowers. Lenders usually base their loan-approval decision on the weaker borrower's credit history.
If both buyers will occupy the home, lenders do not distinguish from buyer or co-buyer. If only one buyer will live in the property, then as long as both sign the mortgage and the loan note, the non-occupant co-borrower will be considered the co-buyer. However, with both buyers on the deed, mortgage and loan note, there is no legal difference. They are treated as equals legally.
Two credit items are important. First, mortgage lenders will base their approval or rejection of financing on the lower credit score of two buyers. They will treat both applicants equally, but make approval decisions based on the lowest credit score. Also, the total mortgage loan will appear on the credit reports of both buyers. In both cases, the buyers and borrowers are treated as equals for credit reporting and repayment responsibility.
Loan Repayment Issues
Both buyer and co-buyer are equally responsible for repayment of the mortgage loan. Each is not legally responsible for one-half the monthly payment or financing. They are each responsible for the full monthly payment and the entire loan. This is not a mortgage loan requirement. Legally, this responsibility pertains to all financing with co-borrowers, including credit card, auto and personal loans.
Both buyer and co-buyer must submit the same volume of documents to get financing approval. Both parties will submit their income, expense and asset information, give access to their full credit reports, and deliver any additional documentation requested by the lender. It does not matter if the co-buyer does not plan to make or contribute to loan payments, they are still responsible for the entire loan. This re-emphasizes the equality of both buyers and borrowers.
Title and Deed
Both buyer and co-buyer must appear on the title deed for a home. Although there is no legal difference between buyer and co-buyer, most lenders want all owners on the deed to also sign the mortgage and loan note. Leaving a co-buyer off a deed, mortgage or loan note can cause legal problems to lenders trying foreclose on the home or collect on a delinquent mortgage loan.