Did you know that relationship statuses can change the mortgage application process? Here’s how:
Are you single?
When you’re single, the decisions and choices are yours alone, and that includes when and where you want to finance a home. However, singles often have one source of income which can make the total household income less than that of couples. If this presents a challenge, consider adding a cosigner. If you have a cosigner, you’re viewed as less of a risk since the agreement shows that someone else can make the mortgage payments if you’re unable to do so. However, having a cosigner can have its downsides. If you cannot make your payments, your cosigner is on the hook and your nonpayment can hurt their credit in addition to yours.
In a Committed Relationship?
You don’t have to be married to apply for a home loan. However, your application may look a little different than if you were married. One person may have to be named the borrower, while the other in the relationship is named the co-borrower. If the couple breaks up, it makes it harder to split up the jointly owned property.
Tied the Knot?
Getting a mortgage while married may make the loan process a little easier, and might help you qualify for more favorable loan terms if you both work and have incomes. As a married couple, you can choose whether you wish to apply for a mortgage jointly or keep the mortgage in one person’s name.
When applying for a loan, the lender uses the lower of the two credit scores. If one person of the couple has bad credit, you may not be able to qualify for the loan that you want. You may have to look for a less expensive house or save up for a bigger down payment so you can finance less of the purchase price. You may also have to accept a mortgage with a higher monthly payment and/or interest rate.
Gone Through a Separation?
Separation makes taking out a mortgage very difficult, because of the possibility that both parties will not cooperate. You will need to be aware of community laws in your state, which dictates how to split up assets. There are some exceptions in these cases, including property bought before you were married and after you were legally separated.
Been Through a Divorce?
Splitting up jointly held property can be damaging to your credit score, so it’s important to work with your attorney to create a strategy to avoid this. This may include living under the same roof until the property can be sold. In addition, it may be beneficial to sell your first home before moving onto a second, as it’s difficult to take out a second mortgage while paying for the first.
Lenders will want to know what your income looks like in the future, including social security payments among other sources of income. They will want to see what benefits will continue for at least three years, otherwise, these benefits cannot qualify as income.