It’s 2017 and there’s no real order to the way that couples do things anymore. Whether you get married and buy a house, or date and live together, most people do things in whatever order they want to. What most don’t consider is how different applying for a mortgage is as a single person, partners or when you’re married. They all differ, and we’re here to break them down for you.
If you’re married and applying for a mortgage with your spouse, there are a couple things you need to know. Being married definitely makes the process easier, but it comes with its own set of hiccups. Being married may help you qualify for better loan terms, as they’ll take the income that you both earn. It helps your debt-to-income ratio as it counts two incomes against the debt you owe. No matter your situation or relationship status, a mortgage is still dependent on income, debt and your credit score.
Something important to note, is that when you apply for a mortgage as a couple, the lender uses the lower of the two credit scores. So if you have terrible credit, but your spouse doesn’t it may make more sense to leave the person with lower credit off of the mortgage application.
If you still want to apply together, you may face higher interest rates. You should consider saving up a bigger down payment, as this will cause you to finance less of the property, perhaps encouraging better rates. You could always look at a less expensive home, or choose higher interest rates and monthly payments.
If you’re single you can make whatever financial decisions, you want. You don’t have to take someone else’s needs and wants into the consideration and you don’t have to worry about their financial history and credit score when you’re applying for a house. Your relationship status won’t be held against you by a lender, and depending on your finances it could benefit you. The one con to applying for a mortgage as a single person is that you don’t have the benefit of a double-income household to help with your mortgage rates. If you, as a single person, earn a high income and have little to not debt in your name, you could be in a good position to purchase a home on your own.
You also have the option as a single person, to buy a home with a co-signer. This makes some mortgage companies more likely to lend to you, as the co-signer agrees to take over mortgage payments if you fail to do so. Co-signing can make a huge difference for a single home purchaser, but it can be dangerous. If you do run into trouble on your payments, it puts pressure on your co-signer, as they’re on the hook financially.
Being married isn’t a requirement to borrow money for a home loan. It’s better to consider this as it will add more complication and responsibility to a relationship. If your relationship ever ended, it’s important to consider that it’s harder to split up jointly owned property, because no one is required to go through legal property division. Lenders will happily loan money to unmarried couples, and most of the same rules apply; you can apply using combined incomes, but the lowest credit score will still be used.