In a tight real estate market, people tend to be creative under pressure. One of those options is to partner up with others on a home purchase and share the ownership. Traditionally, the homebuying market is used to this scenario in the form of a marriage.
However, what is becoming more common today is different individuals sharing ownership. That creates a set of new challenges for all involved, from the buyer to the lender to the seller.
The Advantages of Partnering In
Clearly, the big advantage tends to be the pooling of multiple incomes. If people are comfortable living with each other, their incomes and debt status can be combined to create a stronger pool and viable buyer situation together.
This creates more options for affording a home as well as being able to pay a mortgage, at least financially. Partners in ownership can also share the cost of maintenance, utilities, property taxes and more, basically making all the above less expensive than going it alone.
The Disadvantages Are Present Too
Who is the actual buyer becomes a big legal question with a multi-party purchase. First, all the parties have to be named on all the documentation. Under property law in most states, the parties can share ownership of a title, but it must be spelled out on all the relevant documents.
The financing in question ends up needing to combine individual players into their respective share of the purchase. While real estate agents and brokers can prepare a related purchase document that addresses multiple owners, the financing aspect has to be addressed by the individuals.
This is where things get tricky. Typically, traditional lenders like banks want to deal with one party in a purchase. They then attach the home as collateral, clear of any other title issues.
With a multi-party purchase, the lender of the individual has to share the ownership collateral with other players, making for a messy recovery if it may apply in a default. In these cases, many lenders don’t want to address such a challenge and would avoid such a complicated loan applicant altogether.
Government restrictions may apply too. Conventional loans restrict owners to four people on a loan, period. This is an underwriting rule from federal sponsors of traditional fixed mortgage loans like Fannie Mae and Freddie Mac.
Start Off a Multi-Party Purchase With Expert Help
The best way to deal with a non-traditional purchase approach is to bring in expert loan service help right at the beginning, such as Rob’s Loans (https://robsmortgageloans.com/). Doing so can avoid a lot of preventable headaches and confusion as well as frustration with having the means to buy a home but still being blocked by other concerns from lenders.
