Blomquist: The primary negative of getting help from a co-borrower is that you will be surrendering some degree of control, if not financial benefit, from owning the property. At the very least, you now have another party with a vested interest in the property who will be impacted by decisions made about the property and so likely will expect to be consulted to some degree on those decisions. Co-borrowers may also expect some financial benefit, whether in the form of equity sharing or something else, and you could be responsible for this. In general, involving a co-borrower makes a home purchase more complicated and potentially messy.

GlobeSt.com: What are the future implications of having co-borrowers, and how does this impact the housing market?

Blomquist: More co-borrowing is a creative way the marketplace is responding to the affordability crunch, and it is helping to sustain the housing boom despite home prices that are rising faster than incomes. That is good for the short term, but it could have some unintended negative consequences in the long term. Although not as risky as the exotic loan products fueling the last housing boom, co-borrowing does ultimately represent a situation where buyers are stretching themselves financially to purchase homes, and therefore these loans are more susceptible to default given some external shock such as a recession (homeowner(s) loss of income) or even natural disaster (property damaged and loses value). The good news is that co-borrowers have more skin in the game. Our data shows an average LTV of 79% for loans with co-borrowers in Q2 2017, compared to an average LTV of 84% for loans without co-borrowers.

GlobeSt.com: What else should our readers take away from your report?

Blomquist: If you've ever wondered how people in your city are affording the home prices, at least one way is through co-borrowing. This trend is helping to sustain the growth in home prices that we're seeing in the market, but it is an arrangement that is typically attractive to all the parties involved only when home prices are continuing to rise at a rapid rate. The rising trend in co-borrowers is just one more sign that the housing market is becoming overheated and starting to slowly but surely introduce more risk to keep the real estate engine running at high RPMs.

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IRVINE, CA—More co-borrowing is a creative way the marketplace is responding to the affordability crunch, and it is helping to sustain the housing boom—but there are drawbacks, ATTOM Data Solutions' SVP Daren Blomquist tells GlobeSt.com. A recent report from the firm reveals that 22.8% of all purchase-loan originations on single-family homes in Q2 involved co-borrowers—multiple, non-married borrowers listed on the mortgage or deed of trust—up from 21.3% in the previous quarter and up from 20.5% in Q2 2016. We spoke with Blomquist about the positives and negatives of this trend and its future implications for the housing market.

GlobeSt.com: What are the positives of having a co-borrower in a loan situation?

Blomquist: You may be able to qualify for a loan to buy a home that you might otherwise not qualify for on your own. Our data shows the presence of a co-borrower also helps to reduce the interest rate—the average interest rate on Q2 2017 loans with co-borrowers was 4.11% compared to 4.28% for loans without co-borrowers—which can lower the monthly mortgage payments, making the home purchase more affordable. A co-borrower situation can also involve the co-borrower contributing to the down payment, which also lowers the monthly mortgage payment.

GlobeSt.com: What are the negatives of this situation?

Blomquist: The primary negative of getting help from a co-borrower is that you will be surrendering some degree of control, if not financial benefit, from owning the property. At the very least, you now have another party with a vested interest in the property who will be impacted by decisions made about the property and so likely will expect to be consulted to some degree on those decisions. Co-borrowers may also expect some financial benefit, whether in the form of equity sharing or something else, and you could be responsible for this. In general, involving a co-borrower makes a home purchase more complicated and potentially messy.

GlobeSt.com: What are the future implications of having co-borrowers, and how does this impact the housing market?

Blomquist: More co-borrowing is a creative way the marketplace is responding to the affordability crunch, and it is helping to sustain the housing boom despite home prices that are rising faster than incomes. That is good for the short term, but it could have some unintended negative consequences in the long term. Although not as risky as the exotic loan products fueling the last housing boom, co-borrowing does ultimately represent a situation where buyers are stretching themselves financially to purchase homes, and therefore these loans are more susceptible to default given some external shock such as a recession (homeowner(s) loss of income) or even natural disaster (property damaged and loses value). The good news is that co-borrowers have more skin in the game. Our data shows an average LTV of 79% for loans with co-borrowers in Q2 2017, compared to an average LTV of 84% for loans without co-borrowers.

GlobeSt.com: What else should our readers take away from your report?

Blomquist: If you've ever wondered how people in your city are affording the home prices, at least one way is through co-borrowing. This trend is helping to sustain the growth in home prices that we're seeing in the market, but it is an arrangement that is typically attractive to all the parties involved only when home prices are continuing to rise at a rapid rate. The rising trend in co-borrowers is just one more sign that the housing market is becoming overheated and starting to slowly but surely introduce more risk to keep the real estate engine running at high RPMs.