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I'm able to afford 50% of the house in cash, but my partner and I want joint ownership. We have considered taking out joint mortgage, but my partner's median credit score from the 3 bureaus is higher than mine, so we'll get a better rate if they are the sole proprietor of the mortgage. Is it possible for me to pay 50% in cash, and my partner to take out a mortgage in their name only for the rest?

A follow-up if possible: say hardship befalls my partner. Am I able to start making payments toward the mortgage? Or do I have to "gift" my partner cash in order to avoid taxes? Can the bank come after after my house if my partner fails to make payment?

As suggested, the house will be in TX.

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  • Did you talked to a credit institute already? Even with a much better score, i doubt the bank is happy to give your partner a credit without equity (the invested money is your part of the house). When you are both in the mortgage contract, and a failing to pay it back they can charge your partner and you for the rest not only your partner - which makes it more secure for the bank which means they like you more as a customer.
    – chris
    Dec 14, 2018 at 23:59
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    Please define partner. Marriage or lack or marriage can add details that might be important.
    – mhoran_psprep
    Dec 15, 2018 at 13:56

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While I agree with Bob's answer, (how could I not, it was his experience) I think the best thing you can do is talk to a few banks. A local one, that keeps its mortgages in its own portfolio. Not one that just writes loans and immediately sells them to be repackaged into mortgage pools for investors.

Be upfront with the bank, and give them all the details.

If I were the bank, I'd be happy to offer such a loan, with the condition that you are offering a first lien on your paid-for half. Think about it. Banks give mortgages with 20% all day long, but also under 10% down with PMI. Fluctuations in housing prices mean the bank can easily lose money when houses go 'under water' i.e. the loan is more than the home value, there is no actual water involved. Typically, a bank will loosen their requirement both for income to debt ratios and credit score when a borrower can show such a large down payment.

If partner cannot/does not make a payment, you are at risk, so of course, you should make a payment. This should all be agreed to in advance. If you make any payment or lend them money to make the next payment, they agree that either (a) your equity goes up by the full payment amount, or (b) they owe you the money at X% rate. Whatever your situation, do this all in writing, with a lawyer, who specializes in real estate. You can't have zero risk in such situation, but can minimize potential damage by doing this.

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  • You'd be surprised at how some banks approach things. My partner (girlfriend) had bad credit and I refused to PAY for a credit search on me since when I was putting up 1/2 the cost of the house and borrowing nothing. One offered the absurd suggestion that I deposit the 50% cash in her bank account so that when the bank did a credit search on her, the cash would negate her credit card debt, etc. LOL, really? All of this was traditional banking well before the packaging and sale of mortgages in CDOs. You'd think, as you noted, that the bank would recognize a low risk situation. Not.
    – Bob Baerker
    Dec 16, 2018 at 19:45
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Many, many moons ago when homes were far, far cheaper, I was faced with a mildly similar situation except I had the cash and the good credit score. My partner couldn't get a loan for 1/2 the mortgage. The bank only offered absurd conditions which I would have no part of. There was no good solution so I bought the house for cash. My partner and I worked out the details (at less than market rates) and I held the paper. This was all worked out to our mutual satisfaction by her lawyer. Had we gotten to the end with satisfaction of the loan, I would then have quit claimed half the ownership of the property to her.

In your case, if you have the cash you could do as I did with protective language in the contract. Plan B is: Would it be possible for your partner to be approved for the entire mortgage and once owned, you would then purchase 1/2 the house from her and she would quit claim deed 1/2 ownership to you? Obviously, speak to your lawyer.

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