Reasons For Having Only One Spouse Apply For A Mortgage Loan
I mentioned before that we plan to have just my wife apply for our new home mortgage loan, and not have my name on the mortgage at all. I had been playing around with this idea for months, but it looks like we will be going through with it. Here are some of my supporting reasons:
Helps Prevent Overspending On A House
One of our primary life goals is to be able to live on the equivalent of one income so that we can both work less and enjoy our lives. In order to do so, obviously we will need to maintain a reasonable housing payment. Although it’s clear now that lenders aren’t always the best judges of what is “affordable”, if we couldn’t qualify using only one of us, that would surely be a bad sign. While going through the pre-qualification process, we found banks willing to lend us over 5 times our income!
Although this is usually one of the main drawbacks of only having one spouse on the loan, but we actually saw it as a positive way to help us make sure we weren’t spending too much on a house.
Saves Time and Hassle
We want the best mortgage rate possible, so we are doing a full-documentation loan to prove our financial worthiness. Not only did I only recently finish school again, but a chunk of my income is self-employment income. Doing a full-doc loan with self-employment income involves a ton of scrutiny and at least 2 years of detailed profit/loss records. They also only take the average income over the last two years into consideration. It was simply easier and faster to submit my wife’s more stable and salaried job information.
Projecting A Better Credit Score
Sometimes one spouse has bad credit, so you want to keep their name off the mortgage in order to get a better rate. In our case, it wouldn’t have really mattered since we already got both our scores checked while getting pre-qualified. But my wife’s score is still slightly better than mine - since she doesn’t play silly credit card games - so we figured it wouldn’t hurt.
Leaves Room For Future Mortgage
After we buy the house, I still won’t have a mortgage on my credit report. Supposedly having a mortgage helps your score, but I’ve been doing just fine for over a decade without one, so it doesn’t matter to me. However, if later on I apply for a mortgage myself (investment property?), then I’ll be able to use my full income to qualify since I’ll have no other visible liabilities. Hopefully this will result in a better rate later on down the road as well.
Worst-Case Scenario
Although we never plan on taking advantage of this, if our home does get foreclosed upon, ideally only my wife’s credit score would be hurt as she is the only one responsible for the loan. Of course, I’d also lose my interest in the house.
Both Spouses Can Still Own The House
In our case, we plan on putting both our names on the title of the house with rights of survivorship. From what I’ve read, in many states both spouses have equal interests in any purchased house no matter who is on the mortgage, so it may not even matter.
So no mortgage for me! 
Let me know if I missed something, positive or negative.
Find more in Real Estate | 1/27/08, 4:52am | Trackback
January 27th, 2008 at 5:56 am
I used to work at a bank doing loss mitigation on mortgages.
If we got someone who was married, but had only one person on the mortgage, we were only allowed to use 50% of the non-mortgagor’s income when in calculations.
Basically that means that a lot of people who could technically afford the house were not helped by my bank because they only had one person on the mortgage.
January 27th, 2008 at 7:34 am
It is highly unlikely that this would apply to you, but how would things be divided by the court in a less-than amicable divorce if both spouses are on the title but only one is listed on the mortgage?
January 27th, 2008 at 8:40 am
Note: some banks do not like it when two people are on the title, but not on the mortgage. I have heard situations where such things hold up closing. You might need to get a real estate attorney involved if you are really sold on going that route.
January 27th, 2008 at 9:35 am
Not exactly fun to think about, but what happens if your wife dies (e.g. unexpected, car accident, etc)? What is required to ensure you get the house (and mortgage)?
January 27th, 2008 at 9:36 am
You’re both on the title so you can deduct the real estate taxes if you’re married filing joint. But do you know if you can still deduct mortgage interest?
January 27th, 2008 at 9:42 am
My partner and I recently bought a house, and only I applied for the mortgage, the main reason being that I could qualify for a 1st time homeowner program with a much lower interest rate (the program had certain income qualifications, etc.). We’re not married (we can’t, we’re gay), so we have to put in protections so that she’ll get the house in case I die (a will, etc.) , and we have an agreement in place of what we’ll do in case we split.
January 27th, 2008 at 9:53 am
Because you are using the house as collateral for the mortgage and you live in a community property state, your wife owns only 50% of the house. If your mortgage is more than 50% of the value of the house, the lender will require that you sign the mortgage security note as well. You can qualify for mortgage with one income, but both spouses must sign the security note. Pledging 50% of the house is not enough collateral.
January 27th, 2008 at 9:58 am
Do I smell “exit strategy” behind this in case you deide to split?
Seems kind of selfish, given little, if any benefit that would be derived from this scheme.
I am surprised your wife is agreeable to this arrangmenet. She gets the full loan risk, and gives you 50% of the house???
Hmm.
January 27th, 2008 at 10:44 am
If banks are willing to have that, it’s a good thing. now, if only your wife is owner, and for any reason you go bankrupt, you might not lose the house.
I also agree with E.C. about divorce issues. But these can be very complicated depending on where you live.
Good post.
CtR
January 27th, 2008 at 10:59 am
That’s a good point, Finance Buff. I can see why the bank would not allow you to give away 50% of the house to someone who they can not hold accountable (i.e. 3rd party who is not on the mortgage).
January 27th, 2008 at 11:19 am
Jonathan,
I dont think banks would give loan only in one spouse’s name if both own the house.
think about it. Why would bank loan money to your wife on house that she does not even fully own ? Maybe you guys can get a divorce, give house to your wife. Shet gets the mortgage and you two can mayy again.
January 27th, 2008 at 11:41 am
Having mortgage payments in your own credit history will probably help your credit even if it doesn’t necessarily increase your score. When making decisions about future loans, banks will look at your entire credit file, not just your score. If I was a bank then I would give a better rate to someone who has a history of making consistent mortgage payments, than to someone who just makes his credit card payments. It just seems like a better liability for the bank.
January 27th, 2008 at 12:17 pm
When I got married, my husband had just purchased a house. My name was never on the mortgage or the title. But I worked steadily and made contributions towards paying the mortgage for over five years. We had an amicable divorce, and because I could prove that I contributed toward the mortgage, my ex had to pay me half the equity accumulated in the house since our marriage. Mind you, this was in mediation. I’m not sure how my claim would have stood up in court had the divorce been hostile. Even though I’m sure you are thinking that you will never get divorced, remember that very few people ever imagine themselves doing that when they get married. I certainly didn’t, which is why I never insisted on having my name on the title and mortgage. You might want to speak to a mortgage lawyer regarding this. Also, check into having both names on the insurance.
January 27th, 2008 at 1:34 pm
When I purchase a home I might very well look to do the same thing Jonathan. I like the idea of using the other spouse’s credit to possibly end up getting an investment property.
Also most importantly you know for sure you aren’t taking on more house than you need. Best of luck and let me know how it goes.
January 27th, 2008 at 2:02 pm
There is no exit strategy, both of us will still own half the house. Also, it’s not like either of us can stop paying lest we lose the house. If you have the right type of ownership, one spouse can die and the property will automatically shift to be 100% owned by the other spouse.
However, there are special concerns for Community Property states, which the Finance Buff helpfully pointed out. But for the rest of the country, this seems to be an acceptable practice?
January 27th, 2008 at 2:04 pm
Source: Fairmark
January 27th, 2008 at 2:09 pm
Actually,
we did the same thing and my name was NOT on either the mortgage or the title. after a few years we decided to buy a second house w/o selling the first one. I had no problem getting a loan in my name only for a primary residence. Had my name been on the first title, I would have hard time at the bank explaining how we are going to convert the first house into investment property after we move, blah blah blah. You get the idea.
January 27th, 2008 at 5:50 pm
If one spouse is self-employed or a sole proprietor then I’ve heard it can make sense for that spouse to not be on the title and/or mortgage so as to protect the property from any potential legal action that could result from their work. I believe this applies more to the title than the mortgage.
January 27th, 2008 at 6:28 pm
I can understand your reasons for having only your wife apply for the mortgage but, as others have pointed out, there are lots of things to consider. And it seems to me that the documentation on your income really isn’t that important if your wife’s salary is sufficient to get you the loan (unless you have a lot of debt in your name that you’d be bringing to the table so that it cancels out her income, so to speak). Of course, I’m something of a traditionalist when it comes to setting up the finances, so I’d feel pretty weird about having the mortgage in only one person’s name. I think I’d probably want to talk to a real estate attorney first just to make sure everything works the way I want it to.
January 27th, 2008 at 7:28 pm
Everyone, Jonathan is doing things no different than in the other situation of any other married couple would do when one spouse does not work (stay-at-mom or dad). If you have sufficient income and credit history the lender does not care. But legally both spouses have to be on the title, atleast this is what was told me to be by the lender and realtor. I just purchased a house in Northern Alabama in mid December. I work and my wife stays at the home. BoA did not care but we (my wife and myself) made sure she was on the title of ownership so if anything happens to me she would get ownership and not somehow get it taken away from her and my kids.
January 27th, 2008 at 8:31 pm
I agree with Chief Family Officer - see a real estate attorney.
As far as divorce, I believe this is a non-issue if the incomes and payment of the mortgage is commingled. If both incomes are used to pay the mortgage then the house would be 50/50 upon divorce.
And for death, it passes by probate which would give a step up in basis for 50% of the home to the living spouse.
January 27th, 2008 at 9:14 pm
If one spouse is self employed or a sole proprietor, it would make more sense for the both of you to take title by the entirety. With this form of ownership, you get the benefit of survivorship and protection from the other spouses creditors (if title is taken in the form of joint tenants with the right of survivorship, the survivorship can be severed by a default against the other joint tenant). This can be done simply by the deed saying “…to X and Y, husband and wife.” I suppose this is also predicated on CA being a state which allows title by the entirety. And again, it would not matter that only one of the owners of the property has the mortgage since the deed of trust will control what happens to the title to the property if you default on the mortgage.
January 27th, 2008 at 9:17 pm
I also want to predicate my reply with saying that I assume you are married, since title by the entirety is only available to married couples. However, there is a form of ownership for those who cannot or are not married (ie gay couples). That is the joint life estate with Contingent alternative remainders.
January 27th, 2008 at 10:53 pm
My wife and I both are on the deed to our house, but I’m the only one on the mortgages. This was partly because my while my wife was in school, had too much student loan debt and no income, so no bank would work both of us. I on the other hand with a good solid income and relative debt was able to get the mortgages for our house. I think it is a smart move to do this because it forced us to only buy what I could afford, without even considering my wife as a source of income. She is done with school now though and our household income will go up. Good list of tips overall though.
January 28th, 2008 at 7:22 am
Some weird answers here, like whatever BAP is talking about. Clearly, BAP is not in a community property state.
Community property deals with all of this. It wouldn’t matter if the wife snuck out and secretly bought a house, and everything was in her name, it’s still community property in divorce or death.
Jonathan’s problem would be paying the mortgage, or even getting the bank to talk to him, if something happened to his wife. Make sure those powers of attorney are set up properly!
January 28th, 2008 at 8:04 am
I think it’s a good idea because the simpler it is for the bank, the faster the mortgage will go. The title companies sometimes take forever doing their thing — you don’t want any other hitches (like them looking into some credit item that you forgot about). As long as she can afford it on her own, I think it’s the most expeditious way to get a loan. And maybe you are right about leaving your name clear for future rental property opportunities. I also didn’t know that you could be on the deed without being on the mortgage, though. That sounds a little funny — only because that would be a great way to transfer money, tax free to a relative. I mean, say your parents took $500K and bought you a house (by placing you on the deed) — that would be a tax-free transfer of wealth, right?
January 28th, 2008 at 9:26 am
Community property state or not what “Tenancy by the entirety” does is protect those who own the property. This has nothing to do with what one spouse does secretly. This has to do with protecting the property from creditors (other than the mortgage company). If you take title to the home as Joint Tenants with Right of Survivorship, that is fine, if one of the joint tenants (be it a spouse or whom ever)dies, the title automatically transfers to the other without a need for probate. However if one of the spouses is sued, like in some sort of malpractice, or defaults on another loan, if you have the property as joint tenants the default action taken by the creditor will sever the joint tenancy, the creditor will take ownership of the defaulting spouses interest in the property. The non-defaulting spouse (or the spouse not sued for malpractice) will then own the property, not with her spouse, but with the creditor as Tenants in common, that creditor will then sue for partition which will force the sale of the property. Tenancy by the entirety keeps the severance from ever happening, only the spouses can sever tenancy by the entirety when they divorce. The only reason I bring this up is because you are adding another name to the title at closing when only one spouse is getting the financing, and if you are a married couple it is important to make sure you word precisely in the deed that you are taking title as husband and wife, otherwise you will not get the protection that this offers.
January 28th, 2008 at 10:47 am
I did something similar. I bought a piece property with my wife where we own approx two-thirds and rest by another party. We have a small mortgage on our third. My wife and I are liable to make mortgage payments, however the third party was listed on trhe mortgage.
If you can find a knowledgeable real estate attorney to help it would be worthwhile. He can make sure your deed it titled properly and that you have covred all your bases. If you found a good mortgage banker, he wiil be able to help guide you through the process.
January 28th, 2008 at 11:02 am
I thought of having my boyfriend’s name on the mortgage (while we both pay equal share of the mortgage payment) and both of our names on the title, but the bank asked me to sign a waiver form to give up my rights to claim the house otherwise they wouldn’t let us do this. What was the point of having my name on the title if it doesn’t really give me my share of the house? So in the end we got a mortgage together.
January 28th, 2008 at 3:32 pm
Bottom line, if all you need to do is to sign a mortgage security note (as Finance Buff pointed out) instead of having your self-employment income scrutinized, go for it! Smart move…i might consider it with my wife!
January 28th, 2008 at 10:34 pm
My advice is to look into keeping your name OFF the title by putting the house into a land trust (which requires an attorney). This won’t affect your mortgage or your ability to claim a homestead exemption. It WILL, however, keep your names out of public record and will allow you to avoid the deluge of junk mail from mortgage, insurance, and service companies.
January 29th, 2008 at 9:15 am
So Jonathan, were you able to put the mortgage only in your wife’s name and the title in both of your names? Congrats again on your first home!
January 29th, 2008 at 1:59 pm
I did this exact thing. We were both on the title and only me on the mortgage and it was fine. Only problem was when we needed to refinance, we had to add my husband’s name to mortgage at closing as per some NJ reg.
January 29th, 2008 at 6:48 pm
Congrats on buying a HOTEL! Oh wait.. wrong monopoly piece! LOL
January 29th, 2008 at 6:55 pm
This is exactly what Hubby and I did. The mortgage on our current home is in my name only (he was in school and not working at the time of purchase… also, it helped us stay within a budget). If we buy a second home, the mortgage will be in his name only (and then we’ll rent out the first home). It’s a great way to avoid getting in over our heads, since we’ll always be able to afford the house on one income.
February 7th, 2008 at 1:30 pm
That’s what my husband and I did. He was a waiter/artist, and his income deemed too “unstable”, so I took out the mortgage but we are both on the deed. If anything his credit score was slightly higher than mine but both of us considered excellent credit so that didn’t matter, and the paperwork was simpler and faster. Can’t think of any downsides.
February 20th, 2008 at 7:30 pm
question getting divorced mortage in her name shes ok with moving it into my name but bought house 2 years ago with little money down( thought it would be long term) so owe 330 and its worth about 330 , is it possible to find a company that will let me refie 120percent equity never late on payment or should I just sell and rent again?
February 25th, 2008 at 6:28 pm
We’re about to go to short sale, hopefully not foreclosure, on a house in CA. My wife is the only one on the loan…I THINK, we’re both on the title, but I’m not there right now to find out. The bank is saying that they may want a financial statement at some point to see how money I make…is it relevant if I’m not on the loan?
February 29th, 2008 at 7:59 am
I have this same setup in NC. Both me and my wife are on the title while the mortage is only in my name. We thought this would make it easier for my wife to get loans later on as she would not have any mortgage obligations.
However when we tried to get an auto loan just in her name we realized that the auto loan company would calculate the mortagage payments or some kind of payment towards rent as part of her debt obligations making her debt/income ratio higher that it actually is allowing her to qualify only for a lower loan amount. We tried to explain to them that she does not have to pay any amount towards the home but they would still include some amount as part of her obligations for the home. So now we have ended up applying for a joint auto loan which raises our income and thus lowers the debt/income ratio thus allowing us to qualify for a larger auto loan amount.
So I am not sure there is any advantage to having just one person on the mortage loan while both are on the title. Any comments or help on of this are more than welcome.
June 14th, 2008 at 5:13 pm
My husband and I would like to purchase another home and possibly rent out the one we’re living in now. Our current mortgage is in my name; however, we want to have the next purchase in his name being that I have a student loan that’s coming out of forebearance and other debt which I need to pay down. The loan will cause my debt/income rate to increase which would be an issue for qualifying for the loan if I’m included in the application. We know that he would need a documented rental history when he applies for a fha loan; however, how would we supply this if the mortgage is in my name. We would appreciated any advice. Thanks so much!!
July 29th, 2008 at 8:12 pm
Well we are getting ready to buy a house and my husbands credit score is higher than mine. So they are doing the loan in his name only to get us the best rate. However, since it is a FHA loan my name cannot be put on the deed. Since I will be paying most of the mortgage (My income is higher than his) then I am going to make sure I have legal docs drawn up to ensure that I do not get the shaft just in case something happens.
August 5th, 2008 at 3:39 pm
This is an interesting post. This issue happened to us. My husband was the only one on the mortage, but we were both on the title. Now, we are facing foreclosure or soon to explore bankruptcy for my husband.
The bank did not put me in the mortage for I have no SSN during that time because I am a new immigrant no job and still processing all documents needed to settle down here in CA.
My question is, I still have no credit history, I tried to apply but I only get denied. Now, since my husband is on foreclosed, will it affect me building my credit history since we were both on the deed as husband and wife?
We have joint accounts in Wells and the mortgage company was also in Wells. The questions are, should we close these accounts and set -up a new one only me as the sole owner?
If he files for bankruptcy? would they come after for my own savings even I was not the one filed for bankruptcy?
thanks.