Taking Out a Mortgage with Friends Is Tricky But Not Impossible

July 8, 2015 — Buying into a co-op in New York City can be daunting. Among all the various hoops through which you have to jump is the mortgage. Of course, getting approved on your first mortgage when you make peanuts and have your eye on a pricey piece of real estate can leave anyone feeling disheartened. For determined dreamers ready to take on the challenge, however, there is a way. But it's a tricky one, according to The New York Times: pooling your resources with friends so you can taking out a mortgage as a group. Tricky yes. Even dangerous, said one financial expert to the paper. But not impossible, says Brickunderground: "That doesn't mean it can't be done, just that you need to go in with eyes wide open — and a whole lot of clearly spelled out paperwork." There's a lot that goes on the line if you decide to tackle the challenge of getting a group mortgage — and we're not just talking your friendship. If one person in your group flakes, the rest of you will be left on the hook for a lot of money that you weren't ready to pay. But if you're still willing to risk it, Brickunderground reminds you that "any mortgage lender will consider the lowest credit score in the group as the baseline for your application (a chain is only as strong as its weakest link, etc.), and that if one buyer ultimately stops paying, everyone's credit will suffer, not just the delinquent payee. To that end, know that you're legally considered responsible for payments on the entire home —not just your portion." As for the clearly spelled out paperwork, Brickunderground says you "spell out ahead of time — and in writing — details like who has access to outdoor space, how the cost of things like bills and repairs will be divvied up, and what will happen if one person decides to jump ship." Meanwhile, the Times recommends "structuring your ownership as 'tenants in common' — as opposed to the more common 'joint tenancy' setup used by married couples — meaning that in the event of a co-owner's death, their share in the property will pass to their estate, as opposed to automatically passing back to the surviving owner (or owners)." It may seem unnecessary, especially if you're going in with friends you've known a long time and trust, but following those tips can prevent a lot of misunderstandings and unpleasant surprises, especially once it's too late and you're all stuck, erm, living in the same place.