Buying a House with a Little Help from Your Friends and Relatives: Pt. 1

January 11, 2018

When housing costs are high and the competition is heated among buyers, a little creativity can make all the difference in your ability to finance a purchase or present the winning bid for the home you want.

These days, not only are parents helping their kids with down payment funds, some adults are doing the reverse: helping their retired parents buy a place, according to Ron Wivagg, national sales support manager for Prosperity Home Mortgage, LLC.

In addition to providing cash to offset the cost of expensive homes or to make a stronger offer, more people are buying homes with the help of a co-borrower to share the monthly housing payments.

Rising numbers of co-borrowers

Nearly a quarter of purchase loans (23.4 percent) included a co-borrower during the third quarter of this year, according to ATTOM Data Solutions’ Third Quarter 2017 U.S. Residential Property Loan Origination Report. That number is up from 22.8 percent in the second quarter of 2017 and 21.3 percent during the first quarter of 2017.

Co-borrowers are identified as any non-married borrowers listed on the mortgage, deed or both. These can be non-married couples buying a home together, friends or relatives buying together, parents helping their kids with monthly expenses, or children helping their retired parents.

“Some kids have enough income but are short on down payment funds, and sometimes the kids have the down payment but not the income to buy,” said Wivagg. “Parents can contribute to the down payment, help pay the mortgage or do both.”

Wivagg points out that there’s a difference between occupying co-borrowers and non-occupying co-borrowers.

“Non-married co-borrowers, who will both live in the property, will complete separate applications, but all the rules are the same as if they were married,” said Wivagg. “Non-occupying co-borrowers also need to fill out separate applications and then the lender will look at the total income and credit reports of all the co-borrowers. Each applicant is evaluated individually and as a group. Only borrowers who are married complete one application together.”

Co-borrowers and credit scores

While having a co-borrower may help with making a competitive offer on a home, one thing a co-borrower cannot fix is bad credit, according to Wivagg.

“The help of a non-occupying co-borrower is not enough to get financing approval if the occupying co-borrower has bad credit,” said Wivagg. “The occupant’s credit has to stand on its own.”

In fact, in some cases homebuyers may be better off with just one borrower on the mortgage rather than having a co-borrower, since the loan approval and interest rate are based on the credit scores of each applicant. If one borrower has a low credit score, it may be best to wait until that person’s credit is better or just use one borrower. You can still put both occupants’ names on the deed.

Next week, we will explore the legal issues of buying a home with an occupying (or non-occupying) co-borrower.

All first mortgage products are provided by Prosperity Home Mortgage, LLC. (877) 275-1762. Prosperity Home Mortgage, LLC products may not be available in all areas. Not all borrowers will qualify. Licensed by the NJ Department of Banking and Insurance. Licensed by the Delaware State Bank Commissioner. Also licensed in District of Columbia, Georgia, Indiana, Maryland, Michigan, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia. NMLS ID #75164 (NMLS Consumer Access at