Tuesday, November 4, 2008

Can Someone Own a House and Not Be Obligated to Pay the Loan?

Q: Can someone be on the title to a property, but not be on the note?

A: Yes, it is not a problem at all. The title deed says who owns the property. The note says who has to pay back the loan. It is possible for someone to be on title (own the property), but not be on the note (be obligated to pay for it).

This can be used to your advantage when qualifying for a loan. If a couple is buying a house and one of them has good credit and the other one has bad credit, it would probably be best for the person with the good credit to qualify for the mortgage and be the only one on the note, but both people could be on title and own the house.

The only disadvantage to doing it this way is that the person with the good credit needs to make enough money to qualify for the loan by themselves. If you want to include someone's income to qualify, then you have to include their liabilities and use their credit score as well. The lowest credit score of all the borrowers is the one that the underwriters use.

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