Getting married is an exciting time filled with moments you'll always remember. It’s also the start of many important decisions you'll make as a couple. For many, the next big step is homeownership. Deciding when and where to buy is important, but there are many things to consider during your homebuying journey.
Your first home purchase can be a lot of fun, and it’s the first major financial decision you’ll make together. While it's common for married couples to share financial responsibilities and purchase a home jointly, there are some situations where couples may decide to buy a home under one spouse’s name.
How homebuying as a couple or jointly differs from buying a house individually as a married person
Buying a home jointly means you may use both of your incomes when applying for a mortgage. However, it also means that both credit scores, as well as the amount of debt each person has, is also included. As an individual borrower, you primarily use your individual income, your personal financial history and your credit score, unless other conditions exist based on you and your spouse’s circumstances.
While there are many factors that may be included in a mortgage application, lenders place a high value on the following:
- Credit score: If one person’s credit score is significantly lower than the others, you may have more difficulty qualifying for a mortgage. When you and your spouse both apply, your lender will use the lower of the two credit scores to determine your eligibility.
- Income: Using the combined income of both spouses means you can usually expect to be eligible for a larger mortgage.
- Debt to income ratio: Your debt to income ratio considers the total amount of monthly debt payments divided by how much pre-tax money you earn each month. If one spouse is carrying a lot of debt, it could lower your mortgage eligibility.
Can a married person get a mortgage without their spouse?
Yes, it is possible. A lender can help you make the right decision for your circumstances. If eligible, it's important to consider that getting a mortgage without your spouse may mean that only your name will be most loan documents, including the Promissory Note for the property. Talk to your lender about options for including your spouse’s name on the title or deed.
There are many factors that may impact a married person’s decision to only have one spouse's name on the Promissory Note and/or Mortgage. For instance, if you have excellent credit but your spouse has poor credit. It's important for married couples to weigh the benefits against the risks when considering a joint or individual mortgage. It may also depend on the type of loan options that may be available for you.
In some states, your spouse may need to sign the mortgage even if they’re not on the title or the Promissory Note for the property.
Joint vs individual mortgage
When buying a home as a married couple, understanding is required on both sides. After all, it's common for spouses to have different financial histories and spending habits. There are benefits to both joint and individual mortgages, depending on your personal situation. Your lender can help you make the right decision for your circumstances.
Benefits of a joint mortgage for newlyweds
Many newlyweds expect to purchase and own a home together. If both spouses have similar credit scores and financial histories, this option may offer a variety of benefits when applying for a mortgage.
- Combined Income/Assets. When considering income and assets alone, more is always better. Using the combined income and assets of you and your spouse means you have greater buying power and may be able to purchase a more expensive home if you both have good financial histories.
- Equal responsibility and ownership. When both spouses buy and finance property together, both names are included on the note and they’re equally responsible for ensuring the debt is paid.
Benefits of obtaining a mortgage individually
Not surprisingly, many newlywed couples don't know everything about their spouse's financial history. One spouse could be in a great position to qualify for a mortgage while the other isn't. Luckily, they can still be able to purchase a home.
- A higher credit score. When both individuals are on the mortgage, the lowest credit score is applied. This could be a problem for couples who have one spouse with poor credit. A loan with one spouse means only the credit score of the individual on the loan (typically the spouse with the highest credit score) may be used.
- No waiting. If one spouse is in a good position to qualify for a mortgage and you're ready to buy a home, you may not have to wait for your spouse to rebuild their credit.
- You live in a community property state. Generally, in community property states, both spouse's names must be included on the mortgage, but you may still have one spouse’s name on the Promissory Note. This can be a benefit for couples who want to borrow money under one name but have equal ownership and responsibility for the property. It's important to note that obtaining a mortgage individually may be more difficult in community property states.
4 steps to buying a home for newlyweds
Buying your first home together is exciting. However, it's important to carefully choose a mortgage that meets your needs both now as well as in the future. These steps can help you get the mortgage that works best for you.
1. Have an honest conversation with your spouse
Newlyweds often know a lot about each other, but finances may not have been a topic thoroughly discussed. Before you visit a lender or fall in love with a home, it's important to understand your financial standing as a couple. Learn these facts before attempting to buy a home.
- Credit score. If one spouse has a significantly lower credit score, it may make it harder to qualify for a joint mortgage. It's not uncommon for potential borrowers to not know their credit score until it becomes a factor in the loan approval process. Both spouses should check their credit scores early on so they know where they stand.
- Monthly income. Both incomes will be an important factor in determining how much house you can afford.
- Financial history and current debts. Student loan debt is common among younger couples. The debt-to-income ratio is an important factor in determining how much of a mortgage you can afford.
- Future goals. Both spouses should be on the same page when considering the responsibility of a mortgage. If you plan to move within ten years, are planning a major career change, or plan to live on one income after having children, you need to plan for the impact these decisions will have on your mortgage.
2. Speak with a Home Lending Advisor
Now that you have a clear view of your financial health, a Home Lending Advisor can help you explore your options for joint and individual mortgages. They may also be able to share mortgage options you weren't previously aware of before purchasing a home.
3. Get prequalified
If you're ready to shop for a home, getting prequalified will help you narrow down your choices. Prequalification shows sellers you're serious about buying a home. It also helps you determine how much you can afford, so you won't waste time looking at homes outside your budget.
4. Consider your future plans
If you're planning to buy a home that you’ll live in for the foreseeable future or if you’re planning to upsize or move, a home lending advisor can help you decide if a fixed-rate mortgage or an adjustable rate mortgage is your best option.
Taking the time to understand your finances and what goes in to purchasing your first home can make a big difference. Speak with a Home Lending Advisor and learn more about your options for buying a home as newlyweds.