July 24th, 2018 8:18 AM by Jackie A. Graves
You’re ready to
buy a house, but you’re buying it with other people. Can you all put your names
on the mortgage? This question doesn’t have an easy answer.
legal limit as to how many names can be on a single home loan. But getting a
bank to accept a loan with multiple borrowers might be challenging.
the government allows
important to know that about 90 percent of
mortgages in the United States are backed by the government via
Fannie Mae, Freddie Mac and Ginnie Mae.
uses an automatic underwriting tool called “Desktop Underwriter.” This is what
most big banks use to approve or deny loans. Lenders plug in your information,
which is processed and analyzed by Desktop Underwriter, to get a determination
of your eligibility.
Fannie Mae, Desktop Underwriter only supports four borrowers. If there are more
than four people on the loan, that would mean a manually underwritten mortgage.
underwriting will narrow your options since many big banks don’t usually
manually underwrite loans. Borrowers who need to go outside of the norm
typically look to credit unions and
Fannie Mae doesn’t limit the number of names on one note, they do require that
all borrowers submit their credit scores, income information and employment
history for assessment in the underwriting process.
Loans allows a maximum of four clients on any single loan transaction. The
exception to that rule is VA loans. National VA loan guidelines permit only the
veteran and his or her spouse to be on the mortgage,” says Bill Banfield,
executive vice president of Capital Markets at Quicken Loans.
applying for a loan with multiple individuals, it is advisable to speak with a
real estate attorney who can help navigate the different requirements and
specific state laws in each situation,” he adds.
It’s wise to
protect yourself before you agree to a mortgage with other people. The best way
to do that is to speak with a real estate or business attorney who can explain
your options and outline the risks you face.
contact an attorney to work out what type of entity is going to take title to
the property. This could be an LLC, a corporation, a trust, or a partnership.
Once you decide what would work best for your particular situation, then the
attorney can draft the legal documents,” says Jim Finn, an attorney at Clark,
Hunt, Ahern & Embry in Cambridge, Massachusetts.
If you’re going
in on an investment property with a few friends or family members, forming an
LLC can protect members from liability if there’s a dispute, lawsuit, someone
stops paying the mortgage or wants to sell the property.
“If it’s an
investment, I would suggest they do an LLC because that’s going to give them
insulation from personal liability,” says Finn. “They would have an operating
agreement which would spell out how they’re going to split proceeds and share
form an LLC, however, make sure your lender is open to giving mortgages to LLCs
or similar entities, says Finn.
do not want trusts or LLCs to be on the mortgage; they want individuals. The
first step would be to determine how they want to hold title. The next step
would be going to a lender to make sure that’s acceptable,” Finn says.
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