First, I'm going to answer the specific questions you ask and then I am going to review options for getting a mortgage without a credit history, which could be a better financing alternative for you and your parents.
In response to your question about removing your parents from the mortgage and adding yourself in the future, most lenders do not allow co-mortgagors, your parents in this case, to be removed from a mortgage. Borrowers can submit a request to have mortgagors removed but these requests are almost always declined by the lender. Lenders prefer to keep the original mortgagors on the loan because they believe it provides more security and certainty that the loan will be repaid. Additionally, lenders usually do not permit additional mortgagors to be added to a mortgage. In your situation, the only way to have your parents removed from the loan and you added would be to refinance the mortgage in the future. When you refinance the mortgage, you can remove your parents as co-mortgagors and only you and your fiance would be co-mortgagors on the new loan. Please note that there is no guarantee that you will be able to refinance the mortgage in the future or that the interest rate on your new loan would be lower than the interest rate on the original loan.
Instead of having your parents and fiance apply for the mortgage as co-mortgagors, you should consider mortgage programs for borrowers with limited or no credit history. The HomeReady Mortgage Program allows borrowers to use non-traditional credit histories to establish a credit profile and the NACA Home Loan Program uses a character-based credit approach for borrower qualification instead of using your credit score or credit report. The NACA Program also enables borrowers to purchase a home with no down payment and no closing costs.
We provide comprehensive overviews of the HomeReady Mortgage Program and NACA Home Loan Program on FREEandCLEAR. The HomeReady Mortgage program is offered by participating lenders such as banks, mortgage brokers and credit unions while the NACA Home Loan Program is provided through NACA, a not-for-profit organization that offers mortgage programs designed to make home ownership more attainable. We also provide a thorough explanation of Your Credit Score and the Mortgage Process including getting a mortgage with no credit score (at the bottom of the page).
It is important to highlight that if you and your fiance apply for a mortgage as co-borrowers without your parents then the lender does not factor in your parents income and debt to determine your ability to qualify for the loan. This may mean that you qualify for a smaller mortgage amount, depending on you and your fiance's combined monthly gross income and debt. On the other hand, if you and your finance apply as co-borrowers, the mortgage is only in your names, not your parents' names, so the loan would not negatively affect your parents' credit in the future.
Not all lenders offer mortgage programs for borrowers with limited credit histories so you may need to contact multiple lenders to find one that does. You can review lenders in your area by clicking INTEREST RATES We always recommend that borrowers contact at least four lenders when shopping for a mortgage to find the loan that is right for them, especially if you have unique circumstances.