- Raise your taxes
- Lower your taxes (if you’re lucky)
- Affect the types of retirement accounts you can get
- Affect how much you pay for insurance
And, in some cases, getting married can even affect your mortgage.
There are a lot of things to consider when you’re getting ready to buy a house. But if you’re married, one that you might not have thought about is whether you and your spouse should both be on the home loan. In some cases, having only one spouse on the mortgage might be the best option.
Can A Married Person Get A Mortgage Without Their Spouse?
The short answer is “yes,” it is possible for a married couple to apply for a mortgage under only one of their names. If you’re looking to get a mortgage without your spouse, or if you’re just wondering why in the world someone would do this, we’ve got a few answers. We spoke with Lindsay Villasenor, a Rocket Mortgage® operations director, to get some insight on what happens when only one spouse is on a mortgage. If you’re married and you’re taking the plunge into the real estate market, here’s what you should know about buying a house with only one spouse on the loan.
Why Would A Married Couple Buy A House Under Only One Name?
There are a couple of reasons why you might leave your spouse off the mortgage. Let’s take a look at those.
One Spouse Has A Low Credit Score
Unfortunately, mortgage companies won’t simply use the highest credit score between the two of you, or even the average of your scores; they’ll pay the most attention to the lowest credit score. So if your spouse has a credit score that would prevent you from getting the best possible rates, you might consider leaving your spouse off the mortgage – unless you need your spouse’s income to qualify for a decent loan amount.
One Spouse’s Income Doesn’t Meet The Requirements
According to Villasenor, “2/2/2 is a general rule for all documentation requirements.” This simply means that you’ll need 2 years of W-2s, 2 years of tax returns, and 2 months of bank statements. Depending on your situation, more documentation may be required. Conversely, less documentation may be required depending on the type of loan you’re getting, but you should be prepared with these documents just in case.
Now, if one spouse doesn’t meet these requirements – say this spouse doesn’t have 2 years of W-2s – then it might make sense to leave this spouse off the mortgage. If your spouse is self-employed, they will usually need 2 years of business returns (although this may vary depending on the loan type and the structure of the business). If your spouse is unable to provide this documentation – for instance, if they have only been in business for a year – then it may make sense to leave this spouse off the loan.
Things to Know About Leaving Your Spouse Off the Mortgage
If you’re the only one on the mortgage, the underwriter will only look at your stuff, right? Unfortunately it’s not always that simple. Here are a few things to know if you’re getting a mortgage without your spouse.
You Will Probably Qualify For A Smaller Loan Amount
If you’re part of a two-income household, getting a mortgage with both spouses usually means you’ll qualify for a larger home loan. However, if your spouse isn’t on the loan with you, your lender can’t consider your spouse’s income when determining how much you’ll qualify for. Therefore, you’ll probably have to settle for a smaller, less expensive home.
The exception to this would be loans that consider the income of household members for qualification, whether or not they’re on the loan. An example of this is USDA loans, where your income must fall below a certain level.
Joint Bank Accounts Are Just Fine
So, what if you’re only using one income to qualify, but you have a joint bank account with your spouse? According to Villasenor, this doesn’t really impact underwriting.
“As long as our client is on the account and it’s a joint account, it’s determined that they are both legally allowed to access all of the funds,” she says.
Your Mortgage Company May Look At Your Spouse’s Debt
When your mortgage company approves you for a loan, they look at your debt-to-income (DTI) ratio, which is the percentage of your gross income that goes toward debt. Your DTI can have a huge impact on your home loan.
If one spouse has a lot of debt, you might consider leaving them off the mortgage to decrease your DTI ratio. However, if the home is in a community property state and you’re getting a FHA or VA loan, both spouses’ debts will be taken into consideration.
So, what is a community property state? In a community property state, all assets and all debt belong to both spouses. “The phrase, ‘What’s yours is mine and what’s mine is yours’ is actual law in these states,” says Villasenor. There are currently nine community property states in the U.S.:
- New Mexico
If you live in one of these states and you’re getting a FHA or VA loan, your mortgage company will look at the debts of both spouses. If you don’t live in a community property state, then you live in a “common-law state,” and have more flexibility with your property ownership.
FAQs For Applying For A Mortgage Without Your Spouse
As you can see, there’s a lot to think about when buying property without your spouse, and you may still have questions about some things. The answers to most of them are below.
Can I Keep My Spouse’s Name Off The Title?
If you live in a common-law state, then you have the freedom to leave your spouse’s name off of the house’s title. The title is different from the mortgage in that the name on the mortgage shows who is responsible for paying back the loan. The name is on the title dictates who owns the property. Some might consider leaving their spouse’s name off the house title in order to keep their finances separate, to personally manage their life estate, or to protect their home from lenders if their spouse has a poor credit history.
Can You Have Only One Spouse On The Mortgage But Both On The Title?
Yes, having both names on the house’s title won’t affect your mortgage or who is responsible for paying it. Whoever’s name is on the mortgage will be solely responsible for the loan. To learn how to add a spouse’s name to the title after getting your mortgage, continue reading below.
Can I Add My Spouse’s Name To The Title At A Later Time?
If you leave your spouse’s name off the title but want to put it on at a later point, you can do so using a quitclaim deed. A quitclaim deed is used to transfer property between individuals, and is typically used to pass ownership to family members, add a spouse to the title or even remove them from it after a divorce.
The Bottom Line
Leaving your spouse’s name off of your mortgage or title is not a reflection of the quality of your marriage, and in many cases it can be the best choice for both of you to get the house you both want. It could also ensure that you get the best home loan terms.
Even if you’re not sure if both your spouse and you will be on the mortgage, get started today and apply for preapproval with Rocket Mortgage. We will help you make the best decision and get the best loan to meet your shared goals!
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