Married Couple Buying A House Under One Name (Do This!)
Buying a house is one of the biggest decisions you can make in your adult life. There are various reasons why a married couple would buy a home under one name. Maybe one spouse has better credit, or perhaps it’s an investment property; either way, you need to understand the terms.
If you’re a married couple buying a house under one name, know the pros and cons of the decision. You should also know your state’s common law and community property rules. Finally, determine if your spouse will be on the mortgage, the title, or neither.
Purchasing A Home Under One Name
One spouse can buy a house without the other if they are married. In fact, according to SFGate, it’s sometimes more practical to apply for a mortgage with just one spouse.
It’s possible that the wife’s credit has been harmed or that the husband is unemployed. These are the two most common reasons for a couple to purchase a home under one name. Joint mortgages, on the other hand, provide some advantages:
- Increased borrowing capacity
- Responsibilities for loan repayment are shared.
- There will be no joint title or deeds.
You should carefully weigh the benefits and drawbacks of purchasing a home in only one partner’s name. Remember that the deed and title will only be on the deed and title of the husband or wife who takes out the loan.
Poor Credit History
When one partner has weak credit, a married pair is more likely to profit from buying a house separately. An adverse payment history on one person’s credit record could jeopardize your home loan application or dramatically raise interest rates and monthly payments.
The major reason for not buying a house together is because one spouse has terrible credit. Using the consumer report and FICO score of someone with superior borrowing records can make it easier to qualify.
However, consider your credit issues in the context of your spouse’s income, assets, and debt. These other aspects are equally crucial.
Another reason a married couple might choose to buy a house under one name is if one spouse has little or no income. For a multitude of causes, this situation may arise.
- The wife is a mother who stays at home with her children.
- The husband may be unemployed.
- A small business’s earnings aren’t always consistent.
- A self-employed person is unable to prove his or her earnings.
Debt-to-Income (DTI) ratio is taken into account by home lending businesses worldwide, including the United Kingdom, Canada, Australia, Florida, Texas, California, Georgia, and others. The DTI ratio is not aided by a low-earning spouse, although their debts may do so.
Obtaining A Mortgage Without Your Spouse
Without the other spouse, a husband or wife can qualify for a mortgage. Should you, on the other hand, apply for a mortgage without your spouse?
Whether you should apply for a mortgage jointly depends on your financial circumstances. If you both have: Here are some guidelines that may be useful:
- A significant amount of money
- Credit scores that are similar
- A savings account
- A modest sum of money owed
Because banks assess your combined income, you will be able to acquire a larger loan if you have equal credit. It is preferable to apply for a mortgage with your partner in most circumstances.
Mortgage Request Form
You can apply for a mortgage without your spouse, but the firm will decide whether or not to approve your application based on four key underwriting factors. Among these elements are:
- How much money do you bring in on a regular basis?
- How would you rate your credit score on a scale of one to ten?
- What is your total debt?
- What do you have to offer in terms of assets?
One spouse’s credit score and income will be taken into account separately when applying for a loan. On the other hand, debt and asset problems are more challenging to solve. It depends on which spouse owns what and where you live in terms of both assets and debts.
Do Credit Scores And Income Matter When Applying For A Mortgage?
Whether it makes sense for one spouse to apply for a mortgage rather than both, depends on their income and credit scores.
Lenders can frequently distinguish between a husband’s and a wife’s income. Each has a W-2 most of the time.
Dividends from investments or earnings from the sale of stocks and bonds may be sources of shared income. The bank will consider these combined income scenarios and weigh against other individual income.
Credit scores are even easier to understand. Each partner has his or her own. As a result, the lender will only consider the credit record for the spouse who is requesting the loan.
Assets And Debt
The debts and assets of both parties also play a role in determining whether a husband can get a mortgage without his wife.
When one spouse files for a mortgage on their own, property in the wife’s name or debts in the husband’s name may or may not be scrutinized. It is dependent on two factors:
- What city do you call home?
- Who is the owner of the debt or asset?
Underwriters must examine the debts of the non-borrowing spouse, according to the Federal Housing Authority. The bank may divide the financial instruments by the individual owner for traditional loans, but they are unlikely to do so.
Common-Law vs. Community Property States
If you’re married, whether you can buy a house without your spouse is determined by the state you live in. You either live in a community property state or a common-law state.
Community Property States
If you live in a community property state, you and your spouse own all assets gained during the marriage. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
It is possible to leave your spouse off the mortgage if you live in a community property state. However, if you apply for an FHA or VA loan, the lender will have to consider your spouse’s debts, too. This could be problematic if your spouse has a lot of debt because it could increase your debt-to-income ratio.
If you’re keeping your spouse off the mortgage for another reason, like a low credit score, it could be beneficial. If you live in a community property state but don’t want your spouse on the title, that won’t be possible. Because of the community property laws, your spouse will own 50% of the home.
The opposite of a community property state is a common-law state. Common law means that you share equal ownership of any property you acquire while married. You can apply for a mortgage without your spouse, and the lender won’t be able to consider their finances.
Common law states also allow you to put your name on the title without your spouse. If the circumstance arose where you and your partner separated, the home would be yours alone.
Home Buying Considerations
There are a few things to consider when you’re about to apply for a home loan. The standard is to opt for a conventional loan, but this is pretty much impossible if you have less-than-stellar credit. However, you can look at a few different options.
Buy A House By Yourself
If your income is high enough and your credit score is good, you can apply for a mortgage without your spouse. This is beneficial if your spouse has a poor credit score.
A bad credit score could lead to higher interest rates and cause you to have a more expensive mortgage. Plus, in many cases, lenders won’t even consider writing you a loan if you have bad credit.
Apply For An FHA Loan
If your spouse’s credit score prevents you from having a conventional loan, you can apply for an FHA loan. An FHA loan does not have specific credit score requirements. However, lenders usually reserve the best rates for borrowers with a credit score of 620 or above.
Repair Your Credit
If you or your spouse have a low credit score, work on repairing it. You can do this by paying your bills on time every month, fixing any credit report errors. Try to eliminate disputed accounts and keep credit accounts open, but use them wisely.
The Benefits Of One Spouse On The Mortgage
Married couples buying a home or refinancing their current home do not have to include both spouses on the mortgage.
This can sometimes be beneficial based on one spouse’s financial circumstances. There are several reasons a married couple might want to purchase a home in one spouse’s name only.
Avoid Credit Issues
Mortgage issues can arise when one spouse has poor credit on a joint application. Mortgage lenders tend to pull merged credit reports with the history and score of each applicant. Lenders then use the lowest of the two scores or the middle of three scores to evaluate applications.
The term for this process is the “representative” credit score. Unfortunately, lenders don’t average the credit scores of both applicants. Instead, they discard the better applicant’s score and make an offer based on the lower one.
This situation can result in a higher interest rate and can cause issues with qualifying for a loan at all. Credit scores below 580 typically get denied by most lenders. If your spouse has a credit score around that, you should apply for the loan alone.
Save Money On Mortgage Interest
If one spouse has good credit, but the other spouse has excellent credit, the higher-credit spouse should consider applying alone. This can help secure a lower mortgage rate and save you thousands on your home loan in the long term.
The Federal Reserve conducted a study on mortgage costs. 10% of homeowners could have paid at least 0.125% less if the more qualified buyer had applied alone. Another 25% of borrowers could have significantly reduced their loan costs this way.
Preserve Assets If One Spouse Has Debt
Your home is considered an asset that can be liened or confiscated under certain circumstances. Defaulted student loans, unpaid taxes or child support, or unpaid judgments can make your spouse vulnerable to asset confiscation. Buying a house in one name can protect it from creditors.
This also applies if you’re buying the house with money before the marriage. However, if your spouse incurred debt after marriage, the protection may not apply.
Simplify Estate Planning
Having the home in one spouse’s name simplifies estate planning, especially in the case of a second marriage. If you would like to leave your house to your children from a first marriage, it’s easier to do. This is because your spouse won’t have the rights to it.
Prevent Divorce Battles
No one plans on divorcing when they get married. However, if you are putting up most of the money, the process is simplified if you buy the house.
The Cons Of Having One Spouse On The Mortgage
If both spouses have comparable credit and shared estate planning, it makes sense to use a joint mortgage application. Leaving off a spouse with good credit can only decrease your borrowing power.
The biggest drawback of leaving your spouse off the mortgage is that you can’t count that income on the application. This can impact the amount that you’re able to borrow. More income means that you can afford a larger mortgage payment and increases your maximum loan amount.
Couples that apply for mortgages together can often afford larger and more expensive homes than single applicants.
Higher Debt To Income Ratio
Your debt-to-income (DTI) ratio is affected if you leave your spouse off the mortgage. Debt-to-income is how lenders determine how much house you can afford. DTI is determined by comparing your gross monthly income to your monthly debts.
Monthly debts include student loans, auto loans, and credit card payments. Mortgage lenders then determine how much is leftover in your budget for a mortgage payment. The higher your income and lower your debt, the more house you can afford.
DTI requirements are harder to meet if the person on the application has high debts, and they may not qualify for the loan amount they expected.
Little Rights To The Property
If you are not on the mortgage but your spouse is, you can have little rights to the property. Your partner can make big decisions without your consent.
These decisions include borrowing against the home’s equity, selling the property, and leaving the property to someone else. If you are not on the mortgage, you aren’t required to know what happens to the home.
What Are The Qualifications For A Mortgage?
You don’t have to include your non-borrowing spouse on your mortgage note, and they are also not required to be on the title or deed. The bank, however, still requires the non-borrowing spouse to sign some paperwork.
This is because the spouse who isn’t on the mortgage still owns the house, and the bank wants to be sure it can foreclose if the pair falls behind on their payments.
We need to look at the components of a mortgage to understand why the bank does this. The loan is comprised of two crucial documents:
- The mortgage is a type of loan that uses real estate as collateral to secure the debt.
- The note makes the signee responsible for the loan.
The Mortgage And Note
While this may appear to be a little distinction, it is crucial. The note, which is a commitment to pay, is only required to be signed by the borrowing spouse. If the mortgage defaults, the bank will not pursue the other partner for compensation.
Why, therefore, does the bank require both parties to sign the mortgage? Because the mortgage is a lien on the property, this is the case, and it’s the legal document that gives the bank the authority to foreclose and seize the property.
Even if they are not responsible for repaying the debt, the spouse or wife who is not on the note retains ownership of the property. This could lead to a dispute over whose ownership rights take precedence over the other.
If I leave my spouse’s name off the title, can I add it later?
If you leave your spouse’s name off the title, you can add it later through a quitclaim deed. A quitclaim deed lets you transfer property interest from one person to another. The person transferring the interest is called the grantor, and the recipient is called the grantee.In addition to adding your spouse to the title, people get quitclaim deeds for various reasons. Removing a spouse after divorce, passing property to another family member, and putting property into a trust are some reasons. The downside is the quitclaim deed doesn’t provide any guarantees for either party about the property or ownership of it.
Can one spouse refinance a mortgage without the other?
If one spouse is on the existing mortgage, they can refinance the mortgage in their name only. If both spouses are on the existing mortgage, the options depend on the refinancing goals.If both spouses want to remain on a joint mortgage, they both have to apply for a new home loan. It’s impossible to refinance with only one borrower and keep both names on the mortgage. In situations of divorce, things can be tricky. If one person wants to remove the other person’s name from the mortgage, the person removed must agree. You can’t refinance a joint mortgage without the different borrower’s consent; this is considered mortgage fraud.The spouse that remains on the mortgage has to qualify for the loan on their own. This means meeting credit score requirements, employment, income, and debt-to-income ratio. The remaining spouse on the loan will have to pay closing costs, too.
Stacy Randall is a wife, mother, and freelance writer from NOLA that has always had a love for DIY projects, home organization, and making spaces beautiful. Together with her husband, she has been spending the last several years lovingly renovating her grandparent's former home, making it their own and learning a lot about life along the way.
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