Depending on the circumstances, it can be harder to have one spouse on a mortgage loan, but it is possible as long as the sole applicant has enough income. There are many circumstances under which buying a house without your spouse can even make more sense than applying jointly. However, you need to have your own income and satisfactory credit to qualify for a mortgage on your own. For example, a homemaker with no income other than her husband's won't be able to qualify without having him on the loan. That's because income is one of the main factors that lenders use to determine whether you can repay your debts.
TL;DR (Too Long; Didn't Read)
Mortgage lenders require you to take the good with the bad. You cannot use you husband’s income to get a mortgage without having him on the loan or having his bad credit and debt affect your interest rate.
Using His Pay Means He Has to Stay
No mortgage lender allows an applicant to qualify for a home loan based on the income of an individual not also on the loan. Lenders verify that your own income is consistent, steady and sufficient for the mortgage amount and monthly payment you plan to take on. These basic requisites make it impossible for you to take a mortgage out using your husband's pay without including him on the loan application.
Although your husband may be the breadwinner of the family and earns a large income, he is of no value to the loan if his credit is so bad that it doesn't meet the lender's minimum credit standards. In this situation, it makes more sense for your husband to repair his credit, raise his score and pay any judgments or collections hindering his mortgage qualifying. If you absolutely need his pay to qualify for a home loan, and he does meet the lender's minimum credit guidelines – albeit just by a narrow margin – you will have to pay a higher interest rate and possibly receive other unfavorable loan terms. Bad credit increases the risk of default, making your household a high risk for a mortgage lender, therefore raising your interest rate.
A Possibility for Using His Pay
The only possibility for using your husband's pay without putting him on the loan application and making him equally responsible for the mortgage is by getting a gift. Some lenders and loan programs allow applicants to use gift proceeds donated by a relative, a close friend, an employer or a charitable organization. Gift funds may be used when applying for a home loan to buy a house. The gift funds can be used for the down payment and even your closing costs.
Gift funds must be documented or sourced, meaning that you can show the lender exactly where they came from. For example, if your husband gifts you the down payment for a home, the lender needs you to provide a paper trail, such as the withdrawal receipt from the bank that holds your husband's funds. The funds would not be considered a gift, but rather your own funds if the account were a joint account. But if the account is only in your husband's name, the funds would be viewed as a gift. The lender also needs to see that your husband had the funds in his account for a minimum amount of time and that the money did not come from a credit card or another third party. The mortgage lender may ask for your husband's most recent bank statements reflecting deposits of your husband's paychecks or direct deposits from his employment to ensure the gifted funds are not borrowed. A gift letter must also accompany the funds. The letter must state the donor's name, his relationship to you and the date and amount of the gift. It also must include a statement that the funds are indeed a gift requiring no repayment.
Buying a House Without Your Spouse
Getting a mortgage to buy a home without your spouse means that you must provide proof of your own income, credit and assets. You must be able to qualify based on your own financial merits if your husband will not be on the loan application. Even if your husband earns more money than you do, you may still be able to qualify on your own if your income meets the lender's minimum standards.
Mortgage lenders calculate how much of a mortgage payment you can afford using debt-to-income ratios – or a DTI. The DTI you're likely to be held to is 36 percent, 45 percent or even 50 percent if using conventional financing backed by Fannie Mae. The lender compares your monthly minimum debt payments to your gross monthly income to calculate your DTI. Depending on the strength of your credit, assets and other qualifying factors, your DTI cannot exceed these DTI thresholds. The loan type also has a bearing on how high of a DTI the lender allows. For example, loans insured by the Federal Housing Administration (FHA) commonly go as high as 50 percent DTI.
Rules to Watch Out For
Non-borrowing spouses, also known as non-purchasing spouses in FHA terms, are subject to certain rules when left off of a mortgage loan in a community property state. There are 13 community property states, including California. Community property law, as opposed to the common law of most states, makes homes purchased within a marriage equal property of both spouses. Likewise, debts acquired during the marriage by one spouse are also the responsibility of the other spouse. If you purchase a property in San Francisco, for example, it is by law your husband's property, too. However, to circumvent this, lenders typically require a non-borrowing spouse to sign off on their rights to a home before closing on the mortgage. For instance, if your husband is not signing the loan application for an FHA loan and is not considered a borrower on the loan, he may have to relinquish his rights via a deed before closing.
A mortgage lender might also need to pull your non-borrowing spouse's credit if you live in a community property state. In these cases, because marital debt is also community property, the lender counts your husband's debts in your DTI ratio. He doesn't have to be on the loan application to have his debts calculated in the DTI. The lender does this to safeguard itself in case you are required to repay his debts if he can't. The Department of Veteran Affairs – or VA – also requires that any judgments your husband owes be paid off before you can close on your mortgage loan. Your spouse must also provide a letter of explanation for any derogatory accounts that appear on his credit report. According to the VA's guidelines, a married veteran doesn't have to include their spouse's debts in their DTI if they are refinancing or purchasing in a common law state.
Karina C. Hernandez is a real estate agent in San Diego with a background in mortgage origination. She has been licensed since 2004 and received a B.A. in English from UCLA. Karina has written on a variety of financial topics, including credit, real estate finance, insurance and taxes for online channels such as eHow, sfGate, the nest, Quicken, TurboTax, RE/Max, Zacks and Opposing Views.