As the 2017 Spring Market heats up (according to Zillow the best day of the year to list a home on average is May 9th), borrowers may be wondering about some of the pros and cons of purchasing as a couple or with a co-borrower who will also occupy the property.
For the most part the pre-qualification and mortgage process are similar to that of a single borrower, but with an additional borrower questions do arise regarding the effects credit, income calculations, and savings may have.
Let's explore some of the most FAQs that couples often have when contemplating a mortgage:
My partner/spouse doesn't have good credit. Can we still apply?
Yes. Unless the exact FICO scores for each borrower are known, it doesn't hurt for both borrowers to get pre-qualified. Your loan officer will pull credit for each borrower and determine based on the scores if both borrowers meet the credit qualifications. If both borrowers are very much aware of their scores it might be less advantageous for both potential borrower to apply - especially if the individual with the blemished credit is in the midst of credit repair.
My partner/spouse has lower FICO scores than I do. Does that matter?
Yes. When lenders pull credit they pull the scores from all three credit bureaus and use the middle score to qualify the borrower based on the loan type. When there are multiple borrowers the lowest, middle score of all borrowers is used to not only used to qualify all the borrowers, but also used to price out the interest rate and depending on the loan - the mortgage insurance.
If my partner/spouse is not applying for mortgage can he/she be on the deed?
Yes. For married couples in some states, the spouse is automatically added to the deed because of 'marital asset state laws' that apply. Your loan officer or attorney will be able to advise you on the laws in your state. None married couples or single borrowers can add individuals to the deed as desired either during the mortgage process or after by visiting the Municipal Offices where the deed is registered.
My partner/spouse is not going on the mortgage can I still use their income to qualify?
No. If a partner or spouse is not going on the mortgage - meaning that individuals credit, and debts have not been included and evaluated as part of the application and qualification process, the monthly income of that individual may not be used to help the main borrower qualify for the mortgage.
Can my spouse/partner and I use funds in our joint bank accounts for the down payment and closing costs even if we both aren't able to qualify for the mortgage?
Yes. As long as both individuals give written permission allowing both borrowers access to the funds. Please note, the guidelines regarding large deposits and sourcing of gift funds associated with the loan type, would still apply.
Does my spouse/partner need to be employed in order to be a co-borrower on the mortgage?
No. As long as one borrower has income that can be used to qualify for the mortgage. An additional borrower who has qualifying credit, but no or limited income, can be added on to the loan.
Please Note: This article is provided for illustrative purposes only. It is not an offer or commitment to lend money, and it is not an advertisement for a specific mortgage or a specific interest rate. Contact me to run the numbers for your situation.