Can You Be on the Title but Not on the Note?

Plan carefully and get your credit reports before you speak to a lender.

Plan carefully and get your credit reports before you speak to a lender.

Now that you've tied the knot, you want to implement the plans you've made for your new life as a couple. You may want to buy a car or a house and have begun your search. Once you find that spot you've always wanted to live in, you are faced with a dilemma -- one of you has great credit and the other not so good. What do you do now?

Note vs. Title

If you purchase property and have a note, the note is related to the lender and the title is related to ownership of the property from a governmental standpoint. For example, property taxes are charged to the people on the title, not the person who holds the note. The note, on the other hand, is concerned only with the person responsible for paying the loan, regardless of who is listed on the title.

Why Does It Matter?

If one of you has bad credit or no credit, it will adversely affect your interest rate, if you are granted the loan. Though you may be fine, if your spouse is also on the note, your mate's ability to pay is also a consideration. He or she will assume the note should anything happen to you. If you find that you are unable to get the loan at the interest rate you need because of your spouse's credit history, you can apply for the loan with only yourself on the note. If your income is sufficient, you can overcome the problem.

What About the Title?

When you close on a house, both you and your spouse go to the closing and sign all of the paperwork related to the house. Both of your names go on the title. The bank with whom you took out the loan, even if only one of you signed the loan documents, produces a check to pay for the property, which is given to the seller at closing. You have now officially bought the house, your name is on the note and both your names are on the title.

Considerations

Before you decide to go this route, you should keep a few things in mind. If you are the only one on the note, you are the only one legally responsible for the borrowed funds. Your credit is the only credit that is affected whether positively or adversely. If you are both planning to pay the note from your respective incomes, be aware that if one of you loses a job or simply refuses to pay his or her share, the person on the note is still responsible for the total amount you borrowed. Your lender does not care about your personal problems, he just wants the money paid as agreed. Should you divorce, both of you legally own the home, though only one of you is paying the note. Divvying up the equity in the property could be a sticking point, so keep scrupulous records that show exactly how much each of you has paid.

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