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When Would You Leave One Partner Off The Loan Application?

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Spouses Go Solo

They do say that two can live as cheaply as one and a marital partnership usually supports the case for homeownership.  However, occasionally one partner has a mark on their credit history that makes the exception to this rule. In such situations, it might be better to leave them off the loan application entirely.

The details depend on state laws, but sometimes it is more expedient for one partner to apply for finance without including the other on the loan. If you take the twin paths of applying for home financing in one partner’s name, while working to improve the other’s credit, you will make positive steps that pay dividends in the long run. Stretching to action now will deliver prosperity later.

Laws Limit How Lenders Look At You

It might tempt you to wait until you both have high credit scores but real estate keeps on moving and tends to grow to keep pace with inflation. If you can qualify and acquire real estate under challenging circumstances, then you will be riding high when you have finally overcome your obstacles. So while you might have to compromise on the choice of properties now, the equity that you build over time will position you to dictate terms in the future.

Like so many financial activities today, loan applications require a credit check before they gain final approval. Sometimes problems with credit because of events cause honest people to go into debt. You might have been the victim of identity theft or had excessive bills due to medical issues.

The Equal Credit Opportunity Act constrains the questions that lenders can ask about spousal income or ask about marital status, except in certain clearly prescribed circumstances. The lack of dual income will change the equation of your debt-to-equity ratio and that will determine how much you can borrow.

Matters Of Loans And Titles

In some cases, you may be able to use your spouse’s income, but your spouse might have to quit their claim to your shared home. On the downside, your partner’s income might not be included to calculate the amount you qualify to borrow. How does leaving one partner or spouse off a deed impact their claim to sharing the home? As married partners you are still likely to be entitled to an equal share, it depends on your state’s laws about community property.

The requirements vary by state and by case. A hidden benefit is that in the future, if you cannot make the payments, your positions could be reversed, and your partner’s credit is unaffected while yours is suffering for the hit you’ve taken now; you would be no worse off than you are now.

Credit Not Joined As One In Marriage

Just because you have married and agreed to share everything, it does not mean that the credit agencies will go along with that; they do not issue joint credit scores or reports. In the near-term it might just be the best choice to leave one of you off the loan application and start building equity in your home now so that you can move up to the bigger home and lifestyle when time are better, and credit scores have healed.

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Trace Richardson has written 638 articles on BankChirp.com

I'm Trace Richardson and am the founder of LeadPress. I’m a licensed California Real Estate broker and a former equities trader previously holding the Series 7, 63, 55 and 24 securities licenses.

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