A mortgage is a serious commitment. Even if you're already making payments on someone else’s behalf, putting the loan in your own name elevates your level of obligation from a personal responsibility to a legal one. Whether the current mortgagor can assign responsibility to you or you have to take out an entirely new loan, adding your name to a mortgage requires that your credit history and income pass muster with the lender.
Mortgage Nuts and Bolts
A mortgage is not a loan. Rather, it's the paper that secures the loan, and it's one of two documents you'll encounter when you put the mortgage in your name. The second document is the promissory note, which serves as the contract between you and the lender that specifies the terms and conditions of the mortgage loan. It represents your promise to repay the loan and allows the lender to take back the mortgage -- repossess the home -- if you default.
Assuming a Loan
An assumable loan is one the current borrower can transfer to another party. The promissory note states whether the loan is assumable -- few are. If the loan you’re paying is assumable, you'll still have to submit documentation to the lender proving you meet its financial qualifications, but the process is faster and simpler than applying for a new loan.
Refinancing the Existing Loan
If you can't assume the mortgage, the only way to add your name is to refinance the house. Although many people think of a home equity loan or line of credit when they hear the term “refinance,” those loans borrow against equity and create a second mortgage. The type of refinance you need to put the home loan in your name is a cash-out refinance, which is a first mortgage that pays off the current loan and replaces it with a new one that names you as a mortgagor.
Mortgage Payments and Credit History
Your years of on-time mortgage payments probably have boosted the credit score of the current mortgagor. Unfortunately, the payments have no direct effect on your own credit score because the lender doesn't attribute the payments to you when it reports them to the credit bureaus. You'll need to qualify for the new loan on the basis of your history with accounts in your own name. However, show proof of the mortgage payments you're currently making because they document your ability to pay the loan and they show how you've been spending a significant portion of your income.
Your state may require that you have ownership interest in the property you’re mortgaging. If so, the home’s current owner must add your name to the deed when you apply for the loan assumption or refinance. They’ll submit a deed form, which is available from the county administrative offices where the home is located or from a local title company, to record the deed with the county recorder of deeds.
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