Some of the most important commitments we can make include accepting a serious deal, long term relationship – whether with another person or, in the case of your finances, a house for sale in San Francisco, California, Where Boulder, CO, and the accompanying 30-year mortgage. And oddly enough, there is a relationship between money and marriage, especially when that money is tied to a mortgage payment on your house. Your relationship status can have a direct impact on your ability to obtain mortgagewhether you are single, in a long-term relationship, or married.
It’s not that a specific relationship status decides whether you can get a mortgage. But this status can influence the financial factors that a lender Is examine to determine if you are getting approval for the home loan you are applying for. “We don’t look at customers any differently; we take them as fact, ”says Chris Copley, regional director of mortgages at Citizens Bank, Greater Philadelphia Area . “You can have an occupying co-borrower, and that’s great. If you call and say you’re single, that’s okay. We look at the loan based on what is factual, your income, and what you are looking to buy.
Here are seven ways your relationship status can influence your financials – and how that, in turn, could impact your creditworthiness.
1. You are single
Being single means you are free to make your own choices and decisions, and that includes the choice to finance a home when and where you want. If your couple status is single, a mortgage lender won’t hold it against you. But a single person does not maintain a dual income household, which usually results in lower total household income. So, unless your income is high enough and you have already reduced all your other debts on your own, you may not be approved for the loan you want.
One option for single borrowers is to get a co-signer. This makes you less risky for the financial institution lending you the money, since the agreement says someone else will make the mortgage payments if you don’t. Explore this option with caution: co-signing can help, but it also has its drawbacks. If you run into issues and can’t make payments, your co-signer is responsible and your non-payment may deplete their credit. The financial benefits can straining or damaging your relationship.
2. You are in a committed relationship
You don’t have to be married to borrow money for a home loan. Of course, this option requires you to seriously assess whether you are ready to add this complication and responsibility to your relationship. It can be more difficult to divide a condominium property if you separate and are not married; no one is required to go through a legal property division to walk away or end the relationship.
That being said, lenders don’t frown on the fact that legally single people take out a mortgage together. Applying jointly means that you can combine your income, but the lender will always consider the lowest credit score on the application. And if you are not married, your request may be a little different from that of a married couple. Casey Fleming, author of The loan guide, explains that two individual applications are used when you apply for a mortgage with another person if you are not married. These applications are then combined. “We have to name one ‘Borrower’ and the other ‘Co-Borrower’,” says Fleming. “The borrower would usually be the one with the most income, although sometimes it is better to use the one with the best credit. “
3. You are married
Being married is not automatically a marker of success for a lender. Of course, getting a mortgage while you’re married can make the process a little easier – and help you get better loan terms – if you both work and have an income. It also helps improve your debt to income ratio if you can add two incomes and you have little debt between you or only one of the spouses has a manageable debt. But creditworthiness always depends on all the financial facts in your life, like your income, debt and credit rating. If your spouse doesn’t earn a lot of income or has bad credit, it can be difficult to get approved.
As a married couple, you can choose to apply for a mortgage jointly or to keep the loan on behalf of one of the spouses. This flexibility allows you to explore a variety of options that another relationship status may not offer you.
4. You are married, but your partner has bad credit
You can be dedicated to sharing everything within your marriage. After all, when you said “Yes”, you agreed that what is yours is also your spouse’s. So it might seem odd to let someone out of a mortgage application, but it might be the best thing to do if you’re married and your spouse has bad credit. When applying for a couple loan, the lender uses the lower of the two credit scores. If your spouse has bad credit, you may not be able to claim the loan you want.
You may need to consider buying a cheaper home or saving a larger down payment in order to finance less of the property. Or you may need to accept a mortgage with a higher rate interest rate and higher monthly payments. Depending on the home you hope to buy, you can agree to these terms or exclude a spouse from applying for a mortgage.
5. You are separated
Nothing says you can’t get a mortgage during your partner’s separation process. “However, if both people – spouses or not – are on the title,” warns Casey Fleming, “then both have to accept the mortgage in order to do it. One owner cannot encumber the property without the consent of the other owner.
Fleming says the separation makes it difficult to take out a mortgage because the parties involved often do not cooperate. “If two people are on the title but one doesn’t want to be on the loan,” he explains, “it’s possible in California and most other states. The non-borrowing owner simply needs to agree to the loan in writing.
If you live in California – or Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin – you should be aware of the community property laws in your state. In these states, community property is all you own together. There are a few exceptions, including the property you purchased before where were you married after you have obtained a legal separation. Most of the community’s assets must be sold if you separate, unless both parties agree on how to distribute everything. Reaching an agreement here can prove difficult unless the split is contested by either party.
6. You are divorced
Going through or just getting out of divorce proceedings can affect your ability to qualify for a mortgage. Splitting jointly owned property can damage the credit scores of both ex-spouses, so it’s important to work with your lawyers and possibly a financial advisor to create a strategy to avoid this. This strategy may consist of living under one roof for a period of time until a property can be sold. You will probably also have to sell your old marital home before go forward because it is difficult for many borrowers to take out a second mortgage while paying off the first.
7. You recently became a widower
Lenders want to know what your income will look like in the future, including the actual Security death payments or benefits – not what you are eligible to receive. Lenders generally want these benefits to continue for at least three years. Otherwise, they won’t be used as qualifying income, explains Chris Copley of Citizens Bank.
For better or worse, your relationship status can play a role in your financial life when considering a mortgage. It is important to understand how your current situation may affect your loan application before approaching a lender.
How did you learn that the relationship between finances, money, and marriage affects mortgage creditworthiness? Share your experiences in the comments below!