When you love someone enough to give them half your home debt, you know the relationship must be serious. Adding someone’s name to the mortgage means they are jointly responsible for repaying the loan and puts both of your credit scores on the line. Unfortunately, because a home loan isn’t as easy as just calling the mortgage company and adding a name to a mortgage deed, you’ll have to do some legwork to accomplish your mission. If you follow a few simple steps, though, you’ll navigate the process of successfully gifting half of a large debt to someone else.
Contact Your Lender for Options
Call your mortgage company. Because your mortgage is a contract between you and the lender, it’s doubtful that they’ll simply add another name to the mortgage, but it’s the best place to start. If they agree, ask what you’ll need to complete the process.
If they tell you that the only way to add someone’s name is to refinance the loan, ask about their rates, fees and documentation requirements to complete the process. Don’t agree to the new loan yet because there are a few steps to complete to secure a good rate and term.
Confirm Good Credit Score
Check the person’s credit score who you wish to add to the mortgage. A bad credit score on behalf of the other person could actually raise your rate. Advise your friend to grab their free credit report from AnnualCreditReport.com and scour the history information for any glaring credit weaknesses. If the person has already used their free report for the year, have them use their credit or debit card to pay a small fee and secure a report from one of the three credit agency websites online.
Compare Mortgage Rates and Terms
Shop for mortgages. Check your local bank or credit union and ask friends for recommendations of trusted mortgage lenders. Don’t only ask about the interest rate, but also find out what the closing fees will be on a mortgage, along with any prepayment penalties and points added to the loan. Compare these rates and fees with others you’ll find at loan information sites online.
If a traditional lender, such as your bank, credit union or savings and loan, doesn't offer what you want, contact mortgage brokers. Brokers do not actually lend the money, but they essentially do the shopping for you to help you find the mortgage that's best suited to your needs and financial situation.
Check into different types of mortgages to find your best fit. A conventional mortgage may work for you and the person you're adding to your mortgage, but you may also qualify for a VA or FHA mortgage for an even better fit.
Assemble Supporting Documents
Ask what documents will be needed and collect all the necessary papers. Most loans require you to prove income, assets and debt, so begin collecting both your own and the new applicant’s pay stubs, tax returns, bank and brokerage statements and loan information. Because the bank will probably want all of this information physically, make copies of all these documents.
Schedule a Mortgage Closing
After your mortgage application is approved, schedule your closing. At the loan closing, make sure that all the details of the loan are on the contract exactly as they were explained to you earlier in the process. Check the fees, points, length of loan and payment to verify that everything is as you’d previously discussed. Sign the loan with the new loan applicant.
As a former financial advisor to companies and individuals for 16 years, Joe Andrews knows financial planning and marketing from start-ups to personal budgets. He also writes on motor racing, board games and travel. Andrews received his B.A. from Michigan State University in English. He is currently working on a young adult novel.