Buying Home Without Spouse On The Home Mortgage

This BLOG On Buying Home Without Spouse On The Home Mortgage Was PUBLISHED On June 27th, 2020

Married couples do not always have to have joint ownership of assets, especially in their home purchase.

• Buying home without spouse on the mortgage note and the title is permitted by lenders
• Prenuptial agreements are becoming more and more common these days with divorce rates surpassing the 50% mark
• There are financial advantages and disadvantages of being married
• Tax rates may be higher or lower for married couples depending on the individual annual gross income
• Just like married couples filing separate income tax returns, buying home without spouse is becoming more of popular practice in today’s society

In this article, we will discuss and cover Buying Home Without Spouse On The Home Mortgage.

Considerations When Buying Home

There are many considerations to consider when buying home without spouse or with the spouse:

• If one person can qualify for a mortgage, it is not recommended that both married couple go on the mortgage
• Just one person can go on the mortgage note and both married people can go on title
• Why have both people liable. Many married couples want both to go on the mortgage and title. This is not recommended
• Just have both go on title
• This way both own the home 50/50 but only one person has the liability
• If a couple is worried about getting a future divorce and they feel more secure by buying home without spouse and not have them on the title, that is fine too

We will discuss the reasoning behind our recommendation of just having one qualified borrower on the mortgage note on this blog.

Top Reasons For Buying Home Without Spouse

There are many reasons for buying home without spouse.

• One of the main reasons for buying home without spouse is due spouse is because the main borrower has sufficient income to qualify for a mortgage by themselves
• Why add the spouse and have the spouse liable and put a strain on a future high ticket purchase
• When both people go on the mortgage loan, then both are affected and are liable for the loan balance
• If one spouse were to purchase a property just under their own name, then the second spouse can purchase a second home in their name in the future
• By having both people on a property, the loan amount will affect each of them
• It’s like having two mortgage loan balances
• The main borrower has the $400,000 loan balance and the co-borrowing spouse has the same $400,000 mortgage loan balance

It is like having an $800,000 loan balance.

Mortgage Without Spouse Due To Lower Credit Scores

Another reason for buying home without spouse is because the spouse does not qualify or has a lower credit score.

• Mortgage lenders will use the middle credit score of the lower credit score borrower
• The lower credit scores the higher the mortgage rates
• If the spouse has a lower qualifying credit score, then that credit score will be used as the qualifying credit score
• The lower credit score means higher mortgage rates
• If one person’s middle credit score is 700 and the spouse’s credit scores are 580, this can mean a 1.25% difference in mortgage rates

This translates into tens of thousands of dollars in mortgage interest expense over the term of the loan. Unless the main borrower needs the spouse’s income, it is best to leave the spouse off the mortgage note if the spouse has a lower credit score.

Mortgage Without Spouse When Spouse Does Not Qualify

Adding spouse to the mortgage means that the spouse needs to qualify. The spouse needs to meet all agency mortgage guidelines. There are times when a borrower wants the spouse added to the mortgage even though they qualify by themselves. Unfortunately, if the spouse does not qualify, it means that the spouse cannot be added on the loan.

Here are typical reasons for buying home without spouse because the spouse does not qualify:

• May not meet the mandatory waiting period requirements after bankruptcy and foreclosure
• Does not have qualified income
• Has lower credit scores and does not meet minimum credit score requirements
• Late payments after bankruptcy and foreclosure and past 12 months
• Cannot get approve/eligible per automated underwriting system findings
• Does not have job stability or may be 1099 wage earner less than two-year seasoning
• Excessive high student loans and other debts that it negatively affects the main borrower
• Multiple auto loans and/or child support payments that affect debt to income ratios

If the spouse does not meet the above mortgage guidelines, its best to leave the spouse off the mortgage note. Spouses can go on title.

Negative Of Buying Without Spouse

If the home buyer has a working spouse, they may be limited to the amount of mortgage they qualify for.

• Having both full-time wage earners means they can qualify for a larger mortgage amount
• If the spouse is not on the loan, the spouse’s earnings cannot be used for qualified income
• The outcome is qualifying for a smaller mortgage even though the married couple can afford for a larger loan amount

Homebuyers can add non-occupant co-borrowers on FHA and Conventional Loans if they need to qualify for a larger loan amount.

Community Property States

There are nine community property states. All assets and debt obligations in community property states belong to both spouses. In community property states. non-borrowing spouse’s debts are included in the main borrowers’ debt to income ratio calculations.

Here are the nine community property states:

1. Arizona
2. California
3. Idaho
4. Louisiana
5. Nevada
6. New Mexico
7. Texas
8. Washington
9. Wisconsin

Borrowers who live in the above states need to realize that non-borrowing spouse’s debts will be included in borrowers’ debt to income ratio calculations. For more information on buying home without spouse, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are a five-star national direct lender with no overlays on government and conforming loans. We are available 7 days a week, evenings, weekends, and holidays.