Apply Separately or Together? The Dos and Don’ts for Couples Buying a Home
You’re in love, you’re planning on spending the rest of your life together, and you’re looking to buy the dream home in which you will enjoy at least a part of that life. You’re buying the house together, so why wouldn’t you apply for the loan together as well?
In many cases you would. Applying jointly allows you to combine your incomes to qualify for a larger loan amount which makes it easier to afford the house you really want. If both of you have good (or even decent) credit history the chances of being approved are increased. And then there is the peace of mind of knowing you’re really in it together, all the way.
Of course, this question isn’t just of importance to married couples. You don’t have to be legally married to apply for a mortgage together. But there are other variables that will determine the best approach for you to take.
What’s Your Score?
If both of you have good to great credit — or at least similar credit scores — then applying together probably makes sense. But keep in mind that your qualification and rate will be based on the lower of the two credit scores. So unless the partner with the lower score also contributes most of the income, if your scores are widely disparate chances are you’ll be be more likely to be approved and get a better lending rate if the partner with the higher score applies as an individual.
There are ways to build a credit score, so if you’d like to apply jointly to take advantage of combined income to lower the required down payment and increase amount you’ll qualify for then talk to us about boosting the credit score that needs help.
What’s Your Balance?
The same thing applies if one partner is carrying a heavier debt load than the other. Down payment requirements and lending limitations are based to some extent on the ratio of outstanding debt to reportable income. So if one of you is making the same or less as far as income but is carrying a student loan or other debt that is not in both your names, then not having that partner on the mortgage application might make for a more favorable income to debt ratio.
Again, this is something that our Licensed Loan Officers can help you strategize. Maybe it’s moving some funds around to pay down one line of credit, maybe it’s working with your tax adviser to more accurately represent self employed income, let us look at these options with you.
What is Your Tax Situation?
Of course you know that we aren’t tax accountants and we don’t know your particular situation. But one of the big advantages to financing your dream home is that the interest is tax deductible. But it is only tax deductible if your name is on the mortgage. That might be a good thing for you, it might not, depending on how the two of you file. But it is definitely something to talk to your tax adviser about before you make a decision about whose name(s) go on the application.
We’re here if you need to close on your dream home fast (we are, after all, the “home of the 8 Day Close”) and we can help you get the right mortgage for you even when your credit isn’t great. Call your local office, or fill out our easy on-line form, to get one of our licensed loan officers working on the right financing to get you into the home of your dreams!