The home buying experience can be an overwhelming experience that can be exhilarating, fun, stressful and exhausting. The process of securing a mortgage, successfully bidding on a home and completing the transaction can be lengthy, complex and involve seemingly endless professionals. Those professionals may include a buyer’s agent, a loan officer, a home inspector, title […]
Community property laws and applying for a home loan with your spouse
Purchasing a home with your spouse is an exciting time when you can have a place to call your own, decorate as you please, and gain more stability for your family. When taking out a home loan with your spouse, you should know what you’re responsible for and what the laws in your state say regarding property acquired during a marriage, also referred to as a marital property.
Some states are community property states, meaning any property acquired by either spouse during the marriage is considered equally belonging to both parties. This is different from common property law, where spouses aren’t considered jointly responsible unless both their names are listed on the title.
Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. If you live in a community property state, community property laws can affect you when applying for a home loan. Even if you currently live in Missouri, which isn’t beholden to community property laws, it’s good to know what they entail in case you or someone you know, is considering moving to one.
Your spouse’s credit and debts can affect yours in a community property state
Credit and debts are a big part of getting approved for a home loan, and it’s essential to know your rights regarding debt. For example, if you weren’t married when your spouse accrued debt and you live in a community property state, you aren’t responsible for that debt unless you signed on as a joint-owner of that account.
When you apply for a home loan, even if your spouse is a non-purchaser, both of your financial information will be required. Lenders want a good picture of your financial health, and having both sets of records can help with that.
For a government-backed mortgage such as an FHA, if the non-purchasing spouse has poor credit, it cannot be used to deny a loan to the borrower.
Your spouse’s signature will be required when signing for a loan in a community property state
Even if your spouse’s name will not be on the home loan, a signature from both of you is still required. This is typically done to show that your spouse isn’t the borrower.
Are you unsure about the laws in your state regarding marital property and your home loan? Consult with your lender at SmartMortgage.com. They will help you understand everything you need to know about obtaining a home loan in a community property state with your spouse.