Advertiser Disclosure
Mortgage

How Many Co-Borrowers Can You Have on a Mortgage Application?

Jim Akin
By

Quick Answer

There’s no legal limit to the number of co-borrowers on a mortgage, but lenders rarely take applications from more than four or five borrowers due to limits on underwriting software. Applying for a mortgage with multiple co-borrowers can allow you to get a bigger loan, but things can get complicated when multiple borrowers are listed on a mortgage.

<p> Zombie debt is resurrected debt that you likely no longer owe but that a debt collector will try to get you to pay anyway. It can pop up when you least expect it, but you can take action to fight it.</p><p> When you’re armed with the knowledge of how to validate debt and <a href=handle debt collectors, a little undead debt can go down without a fight. Here’s what you need to know.

What Is Zombie Debt?

Zombie debt is debt that pops up when you least expect it. You may encounter zombie debt when you are contacted by a debt collector about a debt you do not owe anymore, or a debt you may have forgotten about. Zombie debts may include things like:

Debt collectors may also contact you with fraudulent debts. These debts can be the result of identity theft, or the collectors may be scammers looking to get your personal information or money. If you suspect fraud, follow steps to validate the debt.

A debt collector may also contact you with debt you originally thought you don’t owe, but could just be an account you forgot about. By regularly checking your credit report, you can feel confident identifying any forgotten accounts.

Why Am I Being Attacked by Zombie Debt?

Zombie debt may rise up out of your financial past on a few occasions. These occasions are often due to record-keeping errors but also from attempts to collect old debt. These may include:

  • Creditors selling debt to collectors with accidental inclusion of resolved debts
  • Debt collectors going after old debt, which may be past the statute of limitations to collect

You cannot be sued for debt that is past the legal statute of limitations. But the span of these limitations may not always be what you expect. For example, debt collectors can use a payment made against your will to claim a restart of the statute of limitations on your debt. It’s important to keep track of the most recent payments toward your debt to properly calculate this timeline.

Some collectors will try to manipulate you into restarting payments with the hope of collecting old debts. This may come in the form of promises to stop harassment for a small payment, or it may be a false assertion the debt will not show on your credit report if a payment is made.

It’s important to note that while you can no longer be sued for collection of some zombie debts, creditors may still be able to pursue you for payment.

How to Deal With Zombie Debt Bill Collectors

Whether bill collectors contact you about zombie debt or a more legitimate account, it’s important to know how to deal with them. You can learn ways that will help you manage the debt without getting harassed.

When dealing with bill collectors, take these steps to authenticate debt, save money and protect yourself from harassment:

  1. Check your credit report. Your debt may not yet have been reported to the credit bureaus. By working with the collectors, you may be able to avoid its appearance on your credit report.
  2. Get familiar with the statute of limitations on debt. After a certain amount of time, you are protected against lawsuits related to debts. Time frames vary by state and debt category.
  3. Validate all debt. Request a debt validation letter if the debt or its amount is unfamiliar to you. Ask for proof of validity within the statute of limitations. The debt collector must pause collections if you send this request within 30 days of receiving the validation notice.
  4. Negotiate your debt. Depending on the situation, you may be able to negotiate a payment plan or a settlement amount with the debt collector. But make sure you’re aware of all implications and potential effects on your credit report that some negotiations may have.
  5. Maintain responsible communication with collectors. If you work with a debt collector to validate and negotiate payment for your debts, maintain good communication. This means keeping them informed of any unexpected changes, documenting your agreements for your own records and remaining civil throughout the process for the most successful negotiation possibilities.
  6. Verify your rights in the situation. When you’re dealing with debt collectors, it's important to understand your rights as they are dictated by the Fair Debt Collection Practices Act (FDCPA). This knowledge can help protect you if a debt collector threatens or harasses you or tries to add illegal fees to your balance.
  7. Send a cease and desist letter when necessary. You should send the letter by certified mail and keep a copy. There are two circumstances when sending a cease and desist letter may help end contact with debt collectors. These include:
    • If the statute of limitations has run out
    • If you are “judgment proof,” meaning you have no current or future assets to satisfy a lawsuit judgment

When dealing with zombie debt and bill collectors, it’s important to feel confident about your rights. If you no longer owe the debt, there are clear steps to take to protect yourself. If it turns out you do owe the debt, there may be helpful negotiation options available to make paying for it less painful.

Bury Zombie Debt Forever

One of the best defenses against zombie debt is to go on the offensive in clearing up your debts. Work to pay off your debts and potentially negotiate payments before debts are sold to collectors. This can help prevent them from returning down the line as zombies.

When you get your free credit report from Experian you can get a clear snapshot of your current debts. Start your fight against zombie debt by getting informed about what you owe.

" class="img" decoding="async">

There's no legal limit to the number of borrowers who can apply jointly for a mortgage, but the practical limit on most U.S. loans is four or five borrowers. While applying jointly with others can help you qualify for a larger mortgage, you should think through all the implications of joint ownership and shared debt before you make the leap.

Here's the lowdown on seeking a mortgage with co-borrowers.

What Are the Benefits of Multiple Co-Borrowers?

When you apply for a mortgage with one or more fellow applicants, the lender considers all of your incomes, debts and credit profiles in its decision. This information is used to determine whether the lender will issue the loan, the interest rate and fees to set on it, and the amount you can borrow.

It's common for couples to apply jointly for a mortgage when buying a home they'll share. And it's not altogether uncommon for friends such as longtime housemates to apply for a mortgage together. In these scenarios, at least one applicant typically benefits from the credit history or financial strength of the other applicant(s):

  • A borrower with a limited or spotty credit history who might otherwise be turned down for a loan might qualify when considered along with a co-applicant.
  • An applicant who'd qualify for a relatively modest loan amount could qualify for a larger loan amount by applying jointly with another party.
  • A group of four or five applicants could, on the strength of their collective incomes and strong credit scores, qualify to buy a multi-unit building to occupy or to use as an investment even if none of the parties could qualify for financing on their own.

Limits on the Number of Co-Applicants

It's rare in the U.S. for a lender to consider a mortgage application from more than four or five individuals. The reason is that most home loans issued in the U.S. are conforming loans: They meet the criteria for purchase by Fannie Mae and Freddie Mac, the government-backed corporations that buy most of the single-family home mortgages in the U.S. from community lenders.

Both of these entities use special software to assist in processing loan applications. Fannie Mae processes applications with an automated tool called Desktop Underwriter, which accepts a maximum of four applicants at a time. Freddie Mac's automated application-processing tool, Loan Advisor Suite, allows up to five co-applicants per loan.

If you wish to have more than a total of five applicants on your mortgage application, you may be able to find a lender that will allow it. But even if you can, the complexities of working with a large number of co-applicants may make it an ill-advised option.

Complications of Multiple Co-Applicants

It's certainly possible to have a harmonious result when borrowing jointly with a number of friends or family members, but uncertainty about the future can make the process risky.

Spouses never take out mortgages with the intention of divorcing, for instance, but marriages end nonetheless, forcing hard decisions about whether to sell the home or have one party keep it. The issues can be even more complex with a greater number of borrowers, even if all are acting in good faith.

Contingencies to think through before entering into a mortgage with multiple co-applicants include:

  • What if one of the co-borrowers is unable to make mortgage payments? If job loss, disability or other factors make one of the borrowers unable to keep up with payments, how will the remaining parties deal? Will you have a provision to buy out the other party? To sell their share to another? (Removing a co-borrower from the loan could require refinancing, an arrangement that could mean higher payments.)
  • What if some co-borrowers want to sell the property but others do not? If two couples buy a duplex, for instance, and one of the four co-borrowers gets a job across the country, how will that be addressed? Must the property be sold? Can the couple staying on buy out the others? Can the vacated property be rented out to cover the mortgage payments? If so, who collects the rent and pays for maintenance of the unit?
  • What if a co-borrower dies? If the deceased person's share of the property goes to an heir, do the other co-borrowers have the option (or obligation) to buy out their late partner's share? Should co-borrowers take out life insurance on one another to cover their respective shares of the property's cost?

How Do You Apply for a Loan With Multiple Co-Borrowers?

Applying for a mortgage with multiple applicants is essentially the same for each applicant as if they'd applied for a loan on their own: The lender will typically require each applicant to provide:

  • Permission to run a credit check, including review of credit reports at one or more of the national credit bureaus (Experian, TransUnion or Equifax) and calculation of credit scores based on the contents of one or more of those reports. Lenders set their own cutoffs for minimum acceptable credit scores, but Fannie Mae and Freddie Mac both require all applicants to have a FICO Score of at least 620 to qualify for conforming loans.
  • Proof of income in the form of pay stubs, tax returns or bank records reflecting direct deposits. Lenders typically don't set minimum income requirements, but they'll want to see that you have a reliable source of income, and that you earn enough to cover your loan payments.
  • Evidence of monthly debt obligations, for purposes of calculating a debt-to-income ratio (DTI). DTI, the percentage of your monthly pretax income devoted to debt payments (including the anticipated amount of the mortgage payment), is used as a measure of your available income and ability to afford the mortgage. Lenders differ in their requirements. Fannie Mae and Freddie Mac set a default maximum DTI of 36%, but allow for DTIs as high as 45% to borrowers with strong credit scores who meet other eligibility requirements.

How Is a Co-Borrower Different From a Cosigner?

The distinction between a co-borrower and a cosigner is that a co-borrower shares responsibility for the mortgage loan and shares ownership in the property being financed, while a cosigner shares responsibility for the mortgage but is not named on the deed or title to the property and therefore does not share ownership.

This difference is far from trivial, but from the standpoint of a mortgage lender, cosigners and co-borrowers are identical: As loan applicants, all are subjected to the same evaluation process and, if the loan is approved, all are equally responsible for making payments under the terms of the loan agreement. If payments fall behind, the lender has legal recourse to go after any or all co-applicants to recoup money owed them under terms of the loan.

The Bottom Line

Teaming up with others for a joint mortgage application can help you qualify for loans in greater amounts or with better borrowing terms than you might get if you applied on your own. But the consequences of entering into a mortgage contract with multiple borrowers can be complicated, and it's wise to think them through carefully before moving forward. Anytime you're considering applying for a mortgage, it's wise to check your credit report and credit score well ahead of time, to clean up any inaccurate entries in the report and, if necessary, to take steps to spruce up your credit score.

Resources
Latest Research
Latest Reviews