Can you (or should you) buy a house without your spouse? Yes; you canÂ take title in many ways, and one of those ways is "a married man / woman as his / her sole and separate property." But what does that mean? And just because you can, does it mean you should?Click to see today's rates (Sep 23rd, 2017)
There a several reasons you might want to purchase a house in your name only: to protect your interests, to plan your estate, to save money, or to qualify for a mortgage.
Many mortgage programs have minimum FICO scores that would get a couple declined if one spouse's score is too low. Whether it's bad credit or just a too-short credit history, if the result is a FICO under 620, you'll be disqualified under many programs.
So it would make sense to put the mortgage in your own name if you can qualify without your significant other's income.
A few years ago, theÂ Federal Reserve studied mortgage costs and found something startling.Â Of overÂ 600,000 loans studied, tenÂ percent could have paid at least .125 percent lessÂ by having the more qualified buyer apply alone.
In addition, anotherÂ 25 percent of borrowers could have â€śsignificantly reducedâ€ťÂ 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 .5 percent in loan fees for a Fannie Mae loan, or $2,000 for a $400,000 mortgage.
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 Â purchase the house with your own sole-and-separate funds, you probably want to keep it a sole-and-separate house.
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.
Of course you don't plan on divorcing when you marry. But if the state if 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.
Taking title as your sole and separate property means that you both still get to live in the house. However, onlyÂ you have an ownership interest. Only your name is on the deed. It's not always 100 percent straightforward, however.
In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), just taking title as sole and separate is not enough. Because that's just showing thatÂ you intend the home to be yours and only yours. It does not indicate yourÂ spouse's wishes.
In community property states, it's assumed that anything acquired by either spouse during the marriage is the property of both. A quitclaim deed, which your spouse signs and you record with your county, identifies the grantorÂ (the spouse relinquishing rights to the property) and the grantee, who remains on title.
In other states, you may also have to quitclaim, so you can't secretly buy property without your spouse'sÂ knowledge. And many lenders also require it for the same reason.
There aren't too many times when you 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.
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.
Lenders don't consider the non-borrowing spouse's credit, however. HUD guidelines state:
The Lender must not consider the credit history of a non-borrowing spouse. The non-borrowing spouseâ€™s credit history is not considered a reason to deny a mortgage application.
The lender must
â€˘ verify and document the debt of the non-borrowing spouse.
â€˘ make a note in the file referencing the specific state law that justifies the exclusion of any debt from consideration.
â€˘ obtain a credit report for the non-borrowing spouse in order to determine the debts that must be included in the liabilities.Â
Fortunately, other loan programs don't necessarily carry this requirement.
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 your escrow closes.
You can even make that a reward for bringing up a low credit score.
Today's mortgage rates are excellent for home purchases. And remember that you may be able to reduce what you pay by only putting the most qualified applicant on the mortgage.Click to see today's rates (Sep 23rd, 2017)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)