It's common for married couples to merge their finances together after the wedding. If you owned a home prior to the marriage, it might make sense for you to refinance the loan to get a better interest rate or dip into your equity with a cash-out refinance loan. If both you and your spouse meet the lender's approval criteria, you can add your spouse to the new loan; however, you can also choose to refinance alone after marriage.
Organize Your Finances
Before you start the refinance process, take some time to review your financial situation. Gather the loan documents for your current mortgage -- the ones you signed at closing -- to review the terms of the loan such as the interest rate and amortization schedule. The schedule, or your last monthly statement, shows what your principal balance is at the current time. Both you and your spouse should also review your credit reports. A credit report includes such information as what you owe, whether you pay your bills on time and if you've recently filed bankruptcy. You can get a free copy once a year through annualcreditreport.com, or you can pay for a report and score through one of the reporting bureaus. If you come across a mistake on the report, contact the credit bureau immediately to correct the error.
Decide Who's Applying
Adding your spouse as a borrower on the refinance loan can potentially help you get approved at a lower interest rate than the rate of your existing loan. For this to occur, however, your spouse must have a good credit score and also have a steady and stable income. If your spouse has less than perfect credit or a high debt-to-income ratio, your chances of getting approved at a better rate, or getting approved at all, decrease.
While married individuals can take out refinance loans without their having spouses listed as another borrower, there are a few stipulations in certain circumstances. In states that practice common law, the non-borrowing spouse is usually required to sign documents stating that she consents to the loan and is aware of it -- but is not responsible for the debt. If you choose to refinance with an FHA loan, your spouse will also be subject to a credit check and in some states, her debt will be included in the total debt-to-income ratio.
Apply for the Loan
You don't have to use your current lender for the refinance loan -- so shop around for the best interest rate and repayment terms to fit your needs. Complete the residential uniform loan application provided by the lender. After you've submitted the application, the lender will review it and verify the information you provide and check your credit. You'll need to show proof of income, such as recent pay stubs, as well as income tax returns and current brokerage and bank statements. Additionally, the lender will require an appraisal of the property to determine its current market value. After the lender analyzes the information during the underwriting process, it makes an approval decision. If your application is denied, the lender must provide you with a written explanation. If you're approved, you can schedule a closing date to sign the loan documents as you did with the original mortgage.
- FHA: FHA Streamline Refinancing Rules for Adding/Removing Borrowers
- Federal Reserve Board: A Consumer's Guide to Mortgage Refinancings
- MyFICO: Get the Score Lenders Use to Evaluate Your Home Refinance Loan
- Total Mortgage Services: FHA Home Loans with a Non-Purchasing Spouse
- Nolo: Marriage & Property Ownership: Who Owns What?
- Bills.com: Apply for a Mortgage When a Spouse Has Bad Credit
- Bankrate.com: 4 steps to refinance your mortgage