My head and my heart are on different plains today. My head knows the facts,…
Each February, love is in the air and prompting couples to begin their hunt for a perfect home. Reality check: Did you know that your relationship status can have a major impact on your ability to get a 30-year mortgage?
While your love life might not completely determine whether you get approved to buy a home or not, whether you register as single, married or somewhere in the middle can have a direct influence on the financial factors lenders consider when determining your rates and mortgage approval. Here’s how relationship status factors into the mortgage lending process:
If you are married:
While being married might make the lending process a little bit easier due to dual incomes and potentially improved debt-to-income ratios, it is not automatically a slam-dunk for getting a mortgage loan. Financial variables of both spouses such as income, credit scores and debt must be considered in the mix by the lender too. Also, if one partner has little or no income or bad credit, it can negatively impact the ability to get a loan, or at least the loan you may have had in mind.
If you’re married but one partner has a less than favorable credit:
Fortunately, married couples have flexible application options and can choose whether to apply jointly or under only one spouse’s name. Given married couples oftentimes share everything, through sickness and health, it may feel uncomfortable to only file under one partner. The truth is, when lenders consider a couple for a loan, they use the lower of the two credit scores as a baseline. So, if one spouse has bad credit, it can result in higher interest rates and a lower total loan approval amount. If the above is concerning to you, it may be a good idea to consider leaving one spouse off the mortgage application.
If you’re in a serious relationship:
You certainly don’t have to be married to purchase a home with someone else, but keep in mind, this is a big commitment and it can be extremely complicated to split assets if the parties decide to split.
That said, two individuals taking out a mortgage loan together means the couple can combine incomes to qualify. As with married couples, both parties’ credit scores and debt-to-income ratios will be considered, and the lowest credit score of the two will be used.
There is a slight difference in the application process for couples who are not married. Both parties will have to fill out separate applications, which will later be joined and one ‘lendee’ will be named the ‘borrower’ and the other will be the ‘co-borrower,’ in the final loan.
If you’re single:
Being single is not something a lender will hold against you. In fact, it means you are free to make independent choices to finance a home wherever and whenever feels right to you. The flip side of applying for a mortgage loan single is, in order to qualify for the home of your dreams, you must meet the income requirements and low income-to-debt ratio on your own, without a dual income.
Single borrowers can enlist the support of a co-signer, which increases the likelihood of loan approval, as someone is essentially signing and agreeing to pay the mortgage payments if you are unable to do so. Keep in mind co-signing is a HUGE responsibility and shouldn’t be taken lightly. If someone is listed as the co-signer and the ‘lendee’ does not complete the payment, the co-signer is on the hook to pay in full and both parties’ credit will tank if the payment is unfulfilled.
Whether you’re married, single or in a serious relationship, it’s important to understand how your relationship could factor into your loan application before you approach a lender.
If you are on the hunt for your dream home, get in touch with us at The Rueth Team and we would “love” to assist you on your journey.