How your relationship status affects your mortgage
You found the love of your life and now you are ready to tie the knot and get a house together. You
have been together for what feels like forever and it has been hard, too hard and now you just want your own space. How do these decisions affect your ability to buy a home?
Wedding Bells and Champagne
Couples have a bit of flexibility when they are ready to apply for a loan. They can apply for a loan together to get approved for a larger loan or only one individual can apply. Depending on your personal financial situation you may choose either option. Lenders look at your income, debit ratio’s and credit score. If either you or your spouse has a lower credit score this could cause both of you together to qualify for a higher interest rate. However, only you or your spouse applies for a loan you can only use that person’s income for determining the qualifying amount. You will need to determine what makes sense for you and your spouse to apply for a mortgage. Speaking openly to each other about your financials. Make sure you understand your financial obligations and your spouse’s obligations. Once you are able to come up with a plan together meet with your mortgage lender to determine the best policy to deciding what will work best with your situation. Going through this process together can strengthen your relationship as you discuss your priorities, financial situation and compromise together.
Time for my Own Space
Great news, lenders are not permitted to hold a divorce or your relationship status against you when apply for a loan. They will however, look at your income to debt ratio’s. Alimony or child support increases the amount of monthly debt and therefore will decrease the amount of the loan that the lender will approve you to obtain. Lenders look at your income to debt ratio including your new soon to be mortgage to ensure that no more than 43 percent of your gross monthly income of your gross monthly income. If your debt ratio pushes beyond 43 percent it will be difficult to find a lender. However, if you are the individual receiving the regular alimony payments, you can use this as income to help you qualify for a mortgage. In order to apply these payments as income you will have to show a 6 month history of the payments as well as documentation that the payments will remain for at least the next 3 years. Your lender will require that you submit to them the divorce decree or separation papers.
Whenever you are ready to buy or sell your next home we are here to help and answer any of your questions. We are terrible at relationship advice but we are able to help you navigate your situation and find/sell your home.