When you think about buying a house with multiple owners, you may instinctively assume that you can only do that with your siblings or with your partner as a married couple. However, it’s actually common for friends and acquaintances to pool resources together and buy a property.
Many providers have a limit of four co-owners for conventional loans, but most of them do not have any limits for manually underwritten loans.
In this post, Champions Mortgage, experts in home purchase and cash out refinance in Texas, will discuss how to buy a house with multiple owners in Houston and everything you need to know about the process.
What Are the Options for Buying a House with Multiple Owners?
You can buy a house with multiple owners in two major ways:
Co-Borrowers
If you choose this option, your entire group will be the primary applicants for the mortgage loan. They will sign the deed with you, and the title will also feature their names.
Co-Signers
You can choose to be the primary borrower for the mortgage loan on your new property and use your family and friends as co-signers. They will take on the responsibility of repaying your loan if you are no longer able to keep up with payments over the lifetime of your contract. However, co-signers are not listed on the deed or title, and it’s essential to understand what rights a cosigner has on a house in the event of unforeseen circumstances.
They will take on the responsibility of repaying your loan if you are no longer able to keep up with payments over the lifetime of your contract.
However, co-signers are not listed on the deed or title.
The Advantages of Buying a House with Multiple Owners
Some of the advantages of buying a house with multiple individuals include the following:
Lower Financial Responsibility
When you buy a house with multiple owners, you spread the financial burden across multiple people. As a result, you’ll have a lower financial responsibility overall.
The down payment, monthly mortgage payments, and maintenance costs will drop significantly. You also get to share property taxes, utility bills, and other costs with other people.
Wider Selection of Properties
By learning how to buy a house with multiple owners, you will have more properties to choose from. You can aim for more square footage or choose more luxurious options.
For some people, buying a property with multiple owners is a chance to own real estate in neighborhoods that were out of reach before.
Lower Risk
Buying a property with other co-owners means sharing the risks associated with homeownership. If the decision to buy the property backfires, you’ll only take a fraction of the heat compared to when you’re shouldering the entire financial exposure.
Better Investment Opportunities
Co-buying a home frees up more equity you can use to rent another home or invest in the stock market. The diversification means you won’t miss out on the possibility of owning a property that will appreciate in value, and you can also position yourself to benefit from the stock market.
How to Buy a House with Multiple Owners: Important Steps to Take
Here are some important things you must do when buying a house with other owners.
Determine Your Buying Goals
You need to determine why you’re buying the property. Do you want to live together with your friends? Do you want an investment property?
It’s important to have clear reasons as it will influence some of your decisions throughout this process. This is also the right time to revisit the purchasing vs. renting a home argument to ensure you’re making the right choice for your finances.
Find Your Co-Owners
Once you have clear goals, the next step is to find like-minded partners with whom you can enter into a successful co-ownership agreement. You need to choose people you can trust. Remember, it’s a long-term commitment.
Secure Financing
You can finance your jointly-owned property with a mortgage loan. However, cash purchases are also possible depending on your partners and the type of property you’re looking at.
As we mentioned above, multiple borrowers can jointly apply for a mortgage loan. However, it’s important to first evaluate your credit scores and finances to ensure they are strong enough for your loan application.
Most lenders look at the lowest credit score in the group when qualifying a mortgage loan for property co-owners and settling on the interest rates. Therefore, it’s a good idea to avoid large disparities in credit scores between your partners.
Start Your House Hunting
After you’ve found the perfect team of co-owners, it’s time to start the hunt for the perfect house.
If you intend to live in the property, you’ll need to consider factors like proximity to work, school for your children, amenities, and more. What qualifies as the perfect house depends on your buying goals.
You can also choose or avoid properties based on size, number of bedrooms and bathrooms, presence (or lack) of a backyard or pool, and more.
Schedule a Home Inspection
The next step in the home purchase process is to schedule a professional home inspection. A professional inspector will uncover any potential problems with the property.
With a clear understanding of the property’s structural integrity, you can determine if the property is worth your investment or if you should look elsewhere.
Get Legal Advice
It’s crucial to work with a real estate attorney that specializes in co-buying agreements. The attorney will help create a comprehensive agreement that protects the interests of all the parties involved. The agreement will outline the rights and responsibilities of everyone.
Options when structuring the agreement, types of co ownership you can settle on include:
- Sole ownership. One person’s name will be on the deed, and they will have exclusive rights to decisions like selling or remortgaging.
- Joint tenancy. All co-owners have equal rights to the property.
- Tenants in common. All co-owners have equal rights to the property but to varying degrees.
The agreement will also cover details like property usage, responsibility for maintenance and repairs, and the exit strategy.
With the agreement in place and financing secured, it’s time to close the deal.
Houston’s Premier Mortgage Company
Do you need further guidance on how to buy a house with multiple owners in Houston? Do you need to take out a second mortgage on an existing property? Call Champions Mortgage today at (281) 727-2500 to schedule a consultation.
