That's the sex thing, right?

bites the tip

This is called tenency in common. I'm unaware of it being illegal in any states and a cursory search brought up nothing. Do you have any leads you can share?

Also, it would require every friend to have savings to put down a down payment and also credit good enough to actually qualify. That's on top of finding 3 or 4 friends you're willing to live with.

Not to mention 3 or 4 ppl that can and will reliably make mortgage payments for 15 or more likely 30 years. Once someone drops out because of life events then they'll want to be bought out by the next person which introduces a whole bunch of headaches. Having watched this exact thing play out, this will most likely turn into a bitter nightmare of endless paperwork and some ruined relationships.

wants to use the property as collateral for the loan

Nothing major honestly. If they default, they would lose their stake in the claim. Since they don’t own the entire house, the bank couldn’t foreclose but they could assume ownership of their portion of the loan. The bank would view it more like a financial instrument rather than a real property.

From experience, basically no banks take collateral on co-owned homes. You probably won’t run into problems like that specifically. You can also easily structure an agreement with a lawyer. In many states you have to have an attorney to buy a home anyway (CT, MA, GA, DE, KY, LA, MD, MI, NH, ND, OK, RI, VT, WV, WO). We used ours to write and tack on the equivalent of an HOA arrangement you’d see in a condominium for our shared rooms.

I do find it amusing we have redditors arguing landlords should be illegal and others arguing co-ownership is a bad idea. Yes, let’s build millions of single room houses for everyone who is single that span the entire continent.

I’m not 100% certain what our attorney did to structure our trust but we were able to do this without the trust having to buy the house itself and still could utilize a CRA loan program loan from a traditional bank and avoid PMI at a lower down payment.