Should my Fiancee and I both be on our mortgage if our payment can be lower if she's the only one on it?

Submitted by WheresTheSauce t3_10pjal6 in personalfinance

Hi all, we're in kind of an unusual situation and wanted a second opinion on this.

Some basic info:

  • This will be our first home.

  • We are looking to spend between $300k-$350k on a home in Indiana. We'd like to put no more than $30k down before closing costs as we would prefer to have more cash on hand. Probably closer to a 5% down payment. We're getting married later this year so we're trying to be as conservative as can be considering two major life expenses in a short time frame (this timeline is not negotiable by the way, so please do not suggest that we wait to buy)

  • I currently make $125k base and my fiancee makes $70k, but may be starting a new position making closer to $100k. Our combined income before bonuses is $195k at least.

  • I had a bankruptcy in 2019, so if I am on the loan, we can only do an FHA. My credit score is also only around 660 because of this. I've had no problems with debt or missed payments since this bankruptcy; I both dramatically increased my income and became more financially literate and disciplined.

  • My fiancee's credit is quite new (~1 year), but it is good.

  • We were told by the lender that we've been working with that just having my fiancee on the loan instead of both of us would be favorable in terms of our monthly payment (substantially lower PMI, roughly the same interest rate) and flexibility to refinance as we could do a conventional loan instead of an FHA. The payment would only be about $150-$200 lower, but that's of course better than effectively throwing that money away.

My primary concern about going about it this way is that this would make my fiancee's debt to income ratio comparatively enormous even though for our combined income we're buying well below our means.

Obviously we could refinance in a few years when my credit is improved and the bankruptcy has been removed from my credit report and that would solve it, but my concern is for how this will impact her credit score and what implications it may have to get another loan like a car loan, renovation loan, etc. The lender I spoke to was pretty assertive that this would be a better move for us overall, but I wanted to field some other opinions.

Thanks in advance for any insight!

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Grizzly_Addams t1_j6kxy01 wrote

My wife and I bought a house this summer and I am the only one on the loan (she still legally owns half the house though). We did it this way because my credit score is better and my salary is high enough to have afforded the house payment on my own. We got a better interest rate going this route.

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Cum_cuddle t1_j6ku03v wrote

State is important. In Michigan for example once you’re married assets are split, so having her purchase on her own at a lower rate makes sense.

Look into your states marriage laws.

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WheresTheSauce OP t1_j6kug46 wrote

Great point. State is Indiana in this case. I'll add that to the OP

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ChiSquare1963 t1_j6kw1bm wrote

The person on mortgage is the one at risk if there are problems, payments get skipped, and mortgage goes into default. For that reason, names on mortgage and deed should match.

It may be possible to do a prenup or other contract to protect her if she’s on mortgage and you are both on deed. I‘m not a lawyer.

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Werewolfdad t1_j6kskgl wrote

> My primary concern about going about it this way is that this would make my fiancee’s debt to income ratio comparatively enormous even though for our combined income we’re buying well below our means.

Her DTI is the same if you’re on the loan when lenders look at her individually, so it doesn’t matter.

> we could refinance in a few years when my credit is improved and the bankruptcy has been removed from my credit report and that would solve it, but my concern is for how this will impact her credit score and what implications it may have to get another loan like a car loan, renovation loan, etc. The lender I spoke to was pretty assertive that this would be a better move for us overall, but I wanted to field some other opinions.

No different than if you are on the loan

The full loan payment, regardless of the number of co-signers, will be used to calculate her DTI for future credit

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ExistentialReckning t1_j6l3xef wrote

I would talk to different lenders. Many only have a 2yr look back for bankruptcy, so the fact it was in 2019 should still allow you to do a conventional loan through many other lenders.

Does your wife not have any other debt? Just a quick back of the envelope calculation, the PITIA on a $320K mortgage would be just a hair under the DTI requirements for most lenders (43%), which doesn't really give her much room for any additional debt in her name.

That said; there is nothing inherently wrong with the loan being in just her name if it's advantageous for PMI rates. She is taking on the financial risk, however. She would be wise not to put you on the title. If things don't work out between you and you're on the title but not the loan, you are entitled every bit as much to the house as she is without any of the financial obligation.

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DJ-Ilium t1_j6lr7ax wrote

FHA is a 2 year wait, USDA is 3 years, and conventional is 4 years from discharge of BK. Some lenders will allow you to go conventional, but probably not if you have to carry MI

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njchave1 t1_j6l5s9x wrote

Look into being a “non borrowing partner” not sure if all lenders do it, but I believe you can still be on title, but not the loan.

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Sweetpotato3607 t1_j6mnjj9 wrote

My husband and I did the same for our first home. Loan is in my name.. Deed was in both our names so we both owned. We never refinance but when we bought second home 3 years later we both were able to be on loan and deed.

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iranisculpable t1_j6kth08 wrote

Only married people should be joint owners

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WheresTheSauce OP t1_j6ktp2v wrote

We will be married this summer. Moving / buying timeline unfortunately doesn't coincide for it to happen the other way around.

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[deleted] t1_j6kw181 wrote

[removed]

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WheresTheSauce OP t1_j6kxetr wrote

Do you really think it's helpful to just tell me what to do while giving no context or insight as to why? Why is it so important in your mind to be married prior to owning the home when we will be married in a matter of months?

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alwayslookingout t1_j6lfj66 wrote

Dave Ramsey repeatedly told a story on his show of a fiancée losing her partner in a car accident right after they bought a house together but not yet married. So now she owns half the house with the other half belonging to the fiancé’s next of kin, his parents.

If you must buy a house with your partner right now just go get a marriage license first then hold your wedding/ceremony after. Or just buy it under one person’s name.

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censorized t1_j6m8tau wrote

Couldn't that just be addressed with a will?

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alwayslookingout t1_j6mwkrb wrote

Or a tenancy in common contract. But if you’re going to draft up a will for this then why not just get a marriage certificate instead?

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johnny5656765 t1_j6lv6to wrote

don't listen to this sub about this point

you can't convince them. should most couples buy a house before they actually tie the knot? no. but if they have thought about and considered the risk like adults then do what's best

the concern is that something happens in the relationship and it ends between buying the house and tying the knot...and i'm not quite sure how either of you would be better off if you had gotten married before breaking up. /u/iranisculpable is not saying "put off the purchase until after marriage" which i can understand, they are saying to rush and get married before buying the house which is psychotic and way more impulsive and likely to result in an issue

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iranisculpable t1_j6mir1o wrote

Thanks for telling me I am psychotic. That is so civil of you. OP is ready to purchase the house and OP should not take the financial risk of joint ownership with someone who is not a spouse.

There is no rush to marriage because the decision to marry has already been made. Having a marriage service performed at the county office protects OP and source legally, and they can still have the planned cultural wedding service and reception.

Blocked for your lack of civility

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Space_-_Trash t1_j6kwb04 wrote

Discuss with your banker both options. If they want your mortgage, they will show you the best route.

You might run into a problem where underwriters know you are getting married in 6 months. Since they are underwriting based on your future ability to pay, they may not be willing to write a 30 mortgage based on her numbers alone. Especially if she is on the edge with credit and DTI.

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WheresTheSauce OP t1_j6kwn99 wrote

The lending specialist I spoke with recommended in no uncertain terms that we go with the option where she's the only one on the mortgage. He also said there would be no problem with approval for just her and he is aware of when our wedding is

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ExistentialReckning t1_j6l1li5 wrote

>You might run into a problem where underwriters know you are getting married in 6 months.

Underwriters can not take marital status into consideration in the underwriting process. This is expressly forbidden by both the ECOA and FHA.

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Space_-_Trash t1_j6lb4xr wrote

Not really a marital status issue. Maybe it is, I’m not a banker and don’t know the laws.

It’s more of an issue where the bank already knows the credit history of one party who will be cohabiting the home, even though they aren’t on the loan.

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ExistentialReckning t1_j6le554 wrote

>Not really a marital status issue.

Yes, it is. Highly illegal and a good way to end up with multi-million dollar fines and increased federal oversight among other possible issues. Fun thing about reguatlors is when they find one significant regulation violation, they go fishing for more.

>It’s more of an issue where the bank already knows the credit history of one party who will be cohabiting the home, even though they aren’t on the loan.

If they're not on the loan, then they're irrelevant to the underwriter. Doesnt matter if they plan to live in the home or not. She could put him on the title to the property and his credit history would still be completely irrelevant as long as he isn't on the loan.

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[deleted] t1_j6ksgdz wrote

[deleted]

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WheresTheSauce OP t1_j6ktlvd wrote

I already mentioned in my post that I'm not going to discuss the homebuying timeline. For reasons both personal and circumstantial, our next home will be purchased and not rented; not discussing that further.

To your last point, it's not a matter of me not being able to be on the loan. We are approved regardless. It's a question of whether or not the lower payment with my fiancee being the only one on the mortgage is worth any potential downsides.

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