Getting a mortgage without your spouse: What are the benefits and drawbacks?

Gina Pogol
The Mortgage Reports contributor

Do you have to apply for a mortgage with your spouse?

Married couples buying a house — or refinancing their current home — do not have to include both spouses on the mortgage.

In fact, sometimes having both spouses on a home loan application causes mortgage problems. For example, one spouse’s low credit score could make it harder to qualify or raise your interest rate. 

In those cases, it’s better to leave one spouse off the home loan.

Luckily, there are a wide range of mortgage programs including low- and no-down payment loans that make it easier for single applicants to buy a home. And today’s low rates make buying more affordable.

Verify your mortgage eligibility (Apr 9th, 2021)

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Benefits of having one spouse on the mortgage

There a several reasons a married couple might want to purchase a home in one spouse’s name only: to protect the buyer’s interests, to plan their estate, to save money, or to qualify for a mortgage.

Avoid credit issues on your mortgage application

Serious mortgage problems can arise when one person on a joint application has poor or damaged credit.

That’s because mortgage lenders pull a “merged” credit report with history and scores for each applicant, and they use the lowest of two scores or the middle of three scores to evaluate applications. The score they use is called the “representative” credit score.

Unfortunately with two applicants, lenders don’t average out the representative scores. They discard the better applicant’s FICO score completely and make an offer based on the lower one.

This could easily result is a higher interest rate. Or, if your spouse’s credit score is low enough, you might have trouble qualifying for a loan at all.

Credit scores below 580 will get denied by most lenders. If one spouse has a score that low, the other should think about going it alone.

Save money on mortgage interest

If one spouse has passable credit but the other has exceptional credit, the higher-credit spouse might consider applying on their own to secure a lower mortgage rate.

This could save you thousands on your home loan in the long term.

A few years ago, the Federal Reserve studied mortgage costs and found something startling. Of over 600,000 loans studied, ten percent could have paid at least 0.125% less by having the more qualified buyer apply alone.

In addition, another 25 percent of borrowers could have “significantly reduced” their loan costs this way.

It may pay to check with your loan officer. For instance, if one borrower has a 699 FICO and the other has a 700 FICO, they’d save $500 in loan fees for every $100,000 borrowed due to Fannie Mae fees for sub-700 scores.

The main drawback to this strategy is that the sole borrower must now qualify without the help of their spouse’s income. So for this to work, the spouse on the mortgage will likely need a higher credit score and the larger income.

Verify your new rate (Apr 9th, 2021)

Preserve assets if one spouse is debt-challenged

Your home is an asset which can be liened or confiscated in some cases. For instance, if your spouse has defaulted student loans, unpaid taxes or child support, or unpaid judgments, he or she might be vulnerable to asset confiscation.

By buying a house in your name only, you protect it from creditors. Note that if your spouse incurred the debt after marrying you, this protection may not apply.

This also applies if you’re buying the place with money you had before marrying. If you purchase the house with your own sole-and-separate funds, you probably want to keep it a sole-and-separate house.

Simplify estate planning

Having the home in your name simplifies estate planning, especially if this is your second marriage. For instance, if you want to leave your house to your children from a previous union, it’s easier to do when you don’t have to untangle the rights of your current spouse to do it.

Head off divorce battles

Of course, you don’t plan on divorcing when you marry. But if the state of your union is a little shaky, and you’re the one doing the heavy lifting on the purchase, you might want to maintain control by buying in your name only.

Verify your loan eligibility as a single borrower (Apr 9th, 2021)

One spouse on the mortgage: Drawbacks

If both spouses have comparable credit and shared estate planning, it often makes sense to use a joint mortgage application.

That’s because leaving a creditworthy spouse off the mortgage can sharply decrease your borrowing power.

Less income means less buying power

The biggest drawback of leaving a spouse off your mortgage is that their income typically can’t be counted on the application. This could have a big impact on the amount you’re able to borrow.

In simple terms, more income means you can afford a larger monthly mortgage payment. This increases your maximum loan amount.

As a result, couples applying for a mortgage jointly can often afford larger and more expensive homes than single applicants.

Potentially higher debt-to-income ratio

Leaving a spouse off the mortgage can also affect your debt-to-income ratio (DTI).

DTI is a key number lenders use to determine how much house you can afford. By comparing your gross monthly income to your monthly debts — including student loans, auto loans, and credit card payments — lenders can determine how much money is ‘left over’ in your budget for a mortgage payment.

The higher your income, and the lower your debts, the more house you can afford.

If one spouse is going it alone on the mortgage application and they have high debts, they could have a harder time meeting a lender’s DTI requirements. Or they may qualify, but for a smaller loan amount than expected. 

Then again, if one spouse has a lot of debt and does not earn the bulk of the income, it might make more sense to leave them off the application as it could ease up on the other spouse’s debt-to-income ratio.

What if one spouse has high income but bad credit?

What if one spouse had great credit but can’t afford the home one their income alone — and the other spouse has good income but poor credit?

In this case, a good solution could be the HomeReady loan from Fannie Mae.

This mortgage program allows you to count extra household income toward your mortgage, without adding the other person as a full co-borrower on the application.

That means the spouse with good credit could apply for the home loan on their own and supplement their income with a portion of their partner’s income to boost their borrowing power. Since the low-credit spouse is not on the application, their poor credit score would not affect the loan eligibility or interest rate. 

The HomeReady loan requires a minimum FICO score of 620 and a 3% down payment.

In addition, the couple must prove they’ve been living together for at least 12 months prior to the application in order for the non-applicant’s income to be counted toward the mortgage.

Check your HomeReady loan eligibility (Apr 9th, 2021)

Can one spouse refinance a mortgage without the other?

If only one spouse is on the existing mortgage — for instance, if they bought the home before getting married — that person is free to refinance the mortgage in their name only. 

If both spouses are on the current mortgage, your options depend on your refinance goals.

In situations where both spouses want to remain on a joint mortgage, they must both apply for the new home loan, go through underwriting, and sign the mortgage papers. It is not possible to refinance with only one borrower on the application and still keep both your names on the mortgage.

Other times, a couple or divorced couple might want to refinance to remove one person’s name from the mortgage. This is possible, but the borrower being removed needs to agree to the arrangement.

It is not possible for one spouse to refinance a joint mortgage without the other borrower’s knowledge or consent — that would be mortgage fraud.

In addition, the spouse remaining on the mortgage needs to be able to qualify for the loan on their own. That includes meeting credit score, employment, income, and DTI requirements. And the person on the loan will have to pay closing costs, as well.

Verify your refinance eligibility (Apr 9th, 2021)

Can one spouse be on the mortgage but both on the title?

If the main reason for purchasing a house in your own name is to have a cheaper mortgage, or to qualify for a mortgage, you can always add your significant other to the home’s title after the loan is finalized. This would officially make you “co-owners” of the home.

Just note, the person on the mortgage loan is solely responsible for repayment.

The co-owner’s name listed on the title does not give them any legal responsibility to help with mortgage payments. And in the event of a foreclosure, only the spouse whose name is on the loan will have their credit damaged.

Can both spouses on the mortgage but only one on the title?

There aren’t too many times when you’d want to do this, because you’re on the hook for the loan without the protection of any ownership interest. But there are instances in which it would be appropriate.

For instance, if you needed the property in just your name for estate-planning purposes, but could not qualify for a mortgage on your own, your spouse might co-sign on the mortgage for you. Or you could both be co-borrowers, because legally, only one mortgage borrower has to be on title to the property.

However, many lenders prefer that all borrowers also take title. That’s because technically, a borrower not on title is not a borrower — just a guarantor.

Guarantors are not legally responsible for making monthly payments. They are liable only for loan balances if the primary borrower defaults. Lenders have to take an extra step and sue the guarantor if the borrower defaults, and they don’t like this.

Mortgage rules in community property states

Taking title as your “sole and separate property” means that you both still get to live in the house — however, only you have an ownership interest. Only your name is on the deed.

But this arrangement is not always 100 percent straightforward.

You will probably have to “quitclaim”

In community property states, just taking title as sole and separate is not enough. That’s because it shows you intend the home to be yours and only yours, but it does not indicate your spouse’s wishes.

In community property states, it’s assumed that anything acquired by either spouse during the marriage is the property of both. That includes real estate.

A quitclaim deed, which your spouse signs and you record with your county, identifies the grantor (the spouse relinquishing rights to the property) and the grantee, who remains on title.

Community property states are as follows:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

In other states, you may also have to quitclaim, so you can’t secretly buy real estate without your spouse’s knowledge. And many lenders also require it for the same reason.

Government-backed loans in community property states

One advantage of having the mortgage and ownership in your name only doesn’t apply in community property states. If you get a government-backed loan like FHA, VA or USDA financing, your spouse’s separate debts still count in your debt-to-income ratios.

For these mortgages, the lender may pull the non-borrower’s credit report to verify their debts. However, that person’s credit score doesn’t count toward the application.

HUD guidelines state:

“The Lender must not consider the credit history of a non-borrowing spouse. The non-borrowing spouse’s credit history is not considered a reason to deny a mortgage application.

The lender must

  • Verify and document the debt of the non-borrowing spouse
  • Make a note in the file referencing the specific state law that justifies the exclusion of any debt from consideration
  • Obtain a credit report for the non-borrowing spouse in order to determine the debts that must be included in the liabilities”

Fortunately, other loan programs don’t necessarily carry this requirement.

What are today’s mortgage rates?

Today’s mortgage rates are excellent for both home purchases and refinancing. And you may be able to reduce what you pay by only putting the most qualified applicant on the mortgage. Check all your options to see what makes the most sense for your new home loan.

Verify your new rate (Apr 9th, 2021)