home matters

Going Solo on Your Home Purchase?

John Pataky | March 1, 2017 3 MIN READ

When you apply for a loan, your mortgage loan officer may ask if you’re married. While this seems like a simple question, it can have major implications. In this month’s Insights, we discuss purchasing a home as a sole owner versus with a spouse or other cosigner, and how that decision shapes the mortgage process.

If you’re married, the first thing you may want to consider is who will be on the title. Your property’s title report legally states ownership, described in what’s called the vesting of the property, such as “Michael A. Jones and Anne B. Jones, a married couple” or “Michael A. Jones, a married man, as his sole and separate property,” among other vesting options. If you want the title to be in your name only, be sure to check with your lender or local title company to find out if your spouse is required to sign the mortgage. While EverBank doesn’t require it, some states, such as community property states, require spouses to sign the mortgage—even if they aren’t listed on the title.

LEVERAGE A CO-SIGNER’S INCOME, ADD IN THEIR DEBT

Once you’ve determined the guidelines in your state, there are a few factors to consider for mortgage qualification purposes. If you’re adding your spouse or a cosigner to your mortgage application, you reap the benefits of leveraging their added income. However, your lender will also take into account their credit standing and any outstanding debt obligations. Two of the most common credit scores used are FICO® Score and VantageScore. Scores range from 300-850 and while the specific factors each company uses to derive their credit score may differ somewhat, most models are based on the five categories below and the emphasis given to each category. Having a score in a higher range like 700-850 demonstrates to a lender that a borrower has exercised the ability to repay past debts in a timely fashion.


Factors That Typically Comprise A Credit Score


COMMUNICATION IS KEY

As future homeowners, it’s important to discuss where you both stand in terms of a credit score range and any blemishes on your credit report from past due accounts, collections, short sales, foreclosures, etc. Ultimately, your lender will likely pull three credit scores from three separate bureaus, determine the median—or middle score—for each borrower, and use the lower of these two middle scores. If one person on the loan brings down the qualifying score, you could be subject to less favorable rates or a higher down payment. You should also discuss how your collective monthly bills stack up against your total income to ensure that the debt-to-income ratio used for qualification is not harmed by adding either of you to the loan. By covering off these items before starting the mortgage process, you’ll save a lot of time and avoid potential stress down the road.

Ultimately, there are several “what ifs” to discuss with your cosigner or partner, such as what would happen if you decide to sell the property, transfer ownership to just one of you or add someone to the property later.

In conclusion, don’t be shy about using your lender as a resource. They can find out if you live in a state that requires spouses to sign the mortgage, even if your spouse will not be a borrower on the property, as well as help you determine whether it’s advantageous to pursue sole-ownership or add a cosigner or spouse. That simple inquiry about your marriage status can be more complex than it appears. Your loan expert can do some calculations to help guide you toward the best option as you encounter homeownership.

John Pataky
John Pataky
EVP, EverBank Consumer Division
John Pataky
John Pataky
EVP, EverBank Consumer Division
John has long served as a leader in the financial services industry. And today, his focus on our clients' needs drives the strategic growth and evolution of our banking and home lending businesses.

All statements, comments and opinions expressed are solely those of the writer or speaker and are not the statements. comments or opinions of EverBank or of any of its affiliates, and are subject to change without notice. All factual information has been obtained from sources that the writer or speaker believed to be reliable, but the accuracy, completeness, and interpretation of the factual information is not guaranteed and has not been independently verified. Not all products are right for everyone. You should conduct your own research and/or consult your advisor before making any home financing decisions.