Buying a House with Your Spouse: Understanding Joint Mortgage Requirements
When Should You Buy a House as a Couple?
Buying a house as a couple under a joint mortgage can be a great option! If you both have stable income, have a good debt to income ratio, and a good credit score, applying for a mortgage together can mean that you double your buying power.
If you and your spouse are looking for your forever home, it can benefit you to pool your finances and apply together. If you can pool your savings for a down payment, you also might be able to avoid paying private mortgage insurance that you might have to pay if you can’t put 20% down by yourself.
When Should You Buy a House Under One Name?
It might seem like it doesn’t make sense to apply for a mortgage alone. After all, the more income the better, right? Not necessarily. If one party has a bad credit score, mountains of debt, or other financial problems, you might end up qualifying for less than one party who has a better financial history. When you submit a joint mortgage application, they run both of your credit reports jointly. You might think that this means they simply average your two credit scores, but this is incorrect. They usually discard the higher FICO score and only use the lower credit score, so applying together could mean that you get denied based on your spouse’s bad credit score. Additionally, if one party has an extreme amount of debt either from credit cards or student loans, it can mean that your debt to income ratio will be heavily affected and disqualify you from purchasing a home.
It might seem like it doesn’t make sense to apply for a mortgage alone. After all, the more income the better, right? Not necessarily. If one party has a bad credit score, mountains of debt, or other financial problems, you might end up qualifying for less than one party who has a better financial history. When you submit a joint mortgage application, they run both of your credit reports jointly. You might think that this means they simply average your two credit scores, but this is incorrect. They usually discard the higher FICO score and only use the lower credit score, so applying together could mean that you get denied based on your spouse’s bad credit score. Additionally, if one party has an extreme amount of debt either from credit cards or student loans, it can mean that your debt to income ratio will be heavily affected and disqualify you from purchasing a home.
Conclusion
When you’re thinking about buying a house with your spouse, you need to consider both people’s financial situation. If you both have a decent income and little debt with good credit scores, it’s a great idea to apply for a mortgage together and pool your funds to be able to afford more. However, if one spouse has a low credit score or mountains of debt, it might be a better idea for only one party to apply for the mortgage.
When you’re thinking about buying a house with your spouse, you need to consider both people’s financial situation. If you both have a decent income and little debt with good credit scores, it’s a great idea to apply for a mortgage together and pool your funds to be able to afford more. However, if one spouse has a low credit score or mountains of debt, it might be a better idea for only one party to apply for the mortgage.
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