If your spouse has less-than-desirable credit, a large amount of debt or an unsteady employment history, you may wonder if you can apply for the mortgage in your name but still count your spouse's income. While applying on your own may help you with a better interest rate and lower debt ratio, lenders won't count your spouse's income unless he's a co-borrower on the mortgage. Before proceeding to get the mortgage alone, carefully review your income, credit profile and current debt to determine how much of a loan you could get. You might find that you actually don't need your spouse's income or that it's better to wait and apply together at a later time.
Since lenders only consider the income of applicants on the mortgage loan, you won't be able to include your spouse's income if you apply in your name only.
Basic Mortgage Approval Factors
When people apply for a mortgage, the lender will look at the employment, credit and financial information for each applicant on the loan to determine whether they qualify and how much money they can borrow for a home. If you want the mortgage only in your name, then the lender won't consider the nonpurchasing spouse's income, credit score or employment in the decision, but any shared debt you have will still play a factor. On the plus side, your shared bank account will still factor in when the lender looks at your assets, meaning you can use the money your spouse deposits for your down payment and closing costs and as cash reserves.
Depending on your income and existing debts, having only yourself on the mortgage means the lender may approve you for a smaller loan than you could obtain with your spouse. You may not qualify at all if your debt ratios are too high for the mortgage program you apply for. You also won't get to take advantage of having your spouse's credit score considered, and this will impact your interest rate. Leaving your spouse off the mortgage application can help you get a better rate if your spouse has poor credit and you have a high score, but it could also mean a less favorable rate if your credit is worse than your spouse's.
Reasons for One Spouse on Mortgage
There are a few situations where a couple may decide it's better to have just one spouse on the mortgage. These usually include credit or debit issues as well as potential problems with your spouse's employment stability.
One common situation is where your spouse might have filed bankruptcy or otherwise has a poor credit history due to high debt, collections accounts or late payments. Excluding your spouse on the loan might seem desirable if you have good credit and a high credit score, since lenders will otherwise emphasize the worse credit score of the two applicants for a joint mortgage. At the same time, if you make enough money to qualify for the desired loan amount, excluding your spouse might make sense if he has high debt like student loans, especially if your spouse also doesn't make much income.
You might also want to leave your spouse off due to issues such as unstable employment or recent self-employment. Lenders generally want all applicants to have at least two years of steady employment and will require employment verification. So, if your spouse has a gap in employment or changed jobs multiple times, this can concern lenders and may lead you to look into applying on your own. If your spouse is newly self-employed and doesn't have two years of tax returns showing steady income from her business, the lender might not be able to count your spouse's income anyway.
Determining Whether to Apply Alone
To decide whether it's in your best financial interest to apply for a mortgage alone, you'll want to do some initial work to evaluate your income, debt ratios and credit profile to determine how much house you can afford. This information will also help you explore which loan programs you might qualify for, including conventional, Veterans Affairs and Federal Housing Administration loans.
- Determine your income. When calculating your monthly income, you'll add up money from any job or self-employment, Social Security, disability income, unemploymentbenefits, investment income, military benefits and other special typesof income like child support, trust income and retirement income. For any income to count, you must be able to document it.
- Get your credit report and score. To get an idea of your current debt and make sure you don't have any late payments or collections accounts, you can obtain your credit report from a site like AnnualCreditReport.com. You can also use the Credit Karma or Credit Sesame websites to both see your credit report and your credit score. Your credit score helps determine the loan programs you qualify for as well as the interest you'll pay. For example, the Lenders Network notes you'll usually need a score of at least 580 for an FHA loan and a score of 620 or more for a conventional mortgage. A score of at least 740 can help you get the best rates and save you thousands in interest over the loan term.
- Calculate your debt ratios. Once you know your total income and monthly debts, you can calculate two important figures lenders will use to determine whether you can afford the mortgage: your front-end and back-end debt ratios. The front-end ratio should generally be no more than 28 percent for conventional mortgages and is your estimated mortgage payment (including property taxes, mortgage insurance, homeowners insurance and any condo or homeowner's association fees) divided by your total gross income; this gives a guideline of how much of a house payment you'll be able to afford. The back-end ratio consists of all your monthly debt payments (including the estimated mortgage payment and joint spousal debt) divided by your gross income; this should be 36 percent or less for conventional mortgages. If your ratios are a bit higher, you can still consider the VA and FHA loan programs since they allow for slightly higher figures.
Online Mortgage Calculators
Once you have this information, try using a mortgage calculator that helps you determine how much house you can afford, such as the ones offered on the Bankrate and NerdWallet websites. You can input information such as your income, estimated loan amount, down payment, credit score, desired loan term and current debts to get suggestions on how much you can comfortably spend. You can also reach out to a financial adviser or loan officer who can run the numbers to see if you qualify on your own and how much you could budget.
Moving Forward With the Loan
After running the numbers and meeting with a lender, you may determine your credit profile and income alone will qualify you for the loan without the need to include any nonpurchasing spouse income. If you choose this option, know that you can still have your spouse's name added to the home's deed. You may even be able to refinance later if you decide you want your spouse on the loan.
If you don't qualify on your own or you need a higher loan amount, you may consider applying with your spouse even if it means a higher interest rate in exchange for counting your spouse's income. However, you'll want to make sure your spouse's credit score meets the minimum requirements for the loan program you desire. You might also decide to wait a bit so that your spouse can increase her credit score, or until you can increase your income or down payment enough so that your desired loan amount is within reach.
- The Lenders Network: Credit Score Needed to Buy a House in 2019
- Magnify Money: When to Apply for a Mortgage Without Your Spouse
- Quicken Loans: Buying a House Without Your Spouse: Your Mortgage Questions Answered
- Rocket Mortgage: Buying A House Without Your Spouse
- Bankrate: How Much House Can I Afford?
- NerdWallet: Mortgage Income Calculator
- Consumer Financial Protection Bureau: What Is a Debt-To-Income Ratio? Why Is the 43% Debt-To-Income Ratio Important?