When should you take out a mortgage without your spouse?

A mature man looks at the mortgage bureaucracy on his couch.

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If you are married and want to buy a house with your spouse, chances are good to apply together for mortgage. When applying for a joint loan, lenders will look at both of your incomes so that you can get approval to borrow a larger amount of money. You will both be legally responsible for repaying the debt, so it will be a common financial obligation that you can work together.

But while it often makes sense to take out a mortgage with your spouse, this is not necessarily the right choice in every case. In fact, there are a few different cases where it may be best to apply for a loan yourself and not mention your spouse as a co-borrower when applying for a loan. Here are two of them.

1. If your spouse has bad credit

Yours credit score is one of the most important factors that determines whether you will be able to qualify for a mortgage and whether you will receive a competitive interest rate from lenders. If you have stellar credit, but your spouse has a low or no rating, then you may want to apply for a loan yourself. This way, your spouse’s low score will not display red flags that could make it difficult to get the best possible score.

2. If your spouse has a lot of debt

If your spouse has a lot of debt, it can also affect your ability to get a loan approved. This is because lenders take into account the debt-to-income ratio. This means that they look at your total debt, in relation to your total income, in order to determine how much they will borrow and what interest rate they will offer you.

Ideally, the debt-to-income ratio would be 36% or lower to have the most competitive interest rates. That includes all debt including the new monthly housing payment after you receive your home loan. Unfortunately, if your spouse owes you a lot of money, it could lead to a higher rate that affects your ability to borrow – especially if he or she has a low income or no income at all.

You need to look at how much your partner is earning, in relation to his debt, to decide if it makes sense not to include him as a co-debtor. If they have large loan payments but are making a lot of money, then it may still be beneficial to include them – but look at the debt-to-income ratio both independently and together when deciding what is likely to lead to the best chance of loan approval.

Other thoughts when taking out a mortgage without your spouse

If you are taking out a mortgage without your spouse, you will also need to consider other complex financial issues that may arise. For example, would you like to name your spouse as a co-owner of the property even if he or she is not a co-borrower on the loan? And you should also consider what the rules would be if you were divorced, as each spouse’s rights and obligations may be affected by whether you live in a Community-owned state.

Talking to a lawyer or financial advisor could be beneficial, as this is a big decision with long-term consequences for your finances. But, the bottom line is that sometimes it makes sense to take out a mortgage yourself, even if you are married – you just have to make sure you think carefully about the decision before you act.

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