Private mortgage insurance (PMI) can be an expensive requirement for your home loan, as it adds more to your monthly payment costs. This is a safeguard that your lender will take out to cover a portion of the amount you borrowed in case you default. Up Next: P.I.T.I.: Understanding The Parts Of Your Mortgage Payment […]
What is a Non-Purchasing Spouse?
When it comes to buying a home, it’s sometimes best to leave your spouse off of the loan so you are able to obtain a home. Depending on your state, a non-purchasing spouse could have a huge influence on your ability to qualify for a home mortgage, regardless of if their name is on the home or not.
Why Have a Non-Purchasing Spouse?
A couple may choose to have a non-purchasing spouse if one has a lower credit history, income, or employment history than the other and seek to help their partner qualify for a loan. Another reason couples may use this method is if they are in the midst of getting a divorce. That way, property rights aren’t disputed and the non-purchasing spouse isn’t responsible for the debt.
Non-Purchasing Spouses May Still Have to Sign a Loan
In certain states, if you have a spouse who is not going to be on the home loan, they may still be required to sign loan paperwork. This signature is simply an agreement that as the non-purchasing spouse, they have no claim on the home’s title and are not responsible for the mortgage.
Depending on the type of loan, your spouse’s credit will be reviewed by your lender but it will not be taken into account. This means that although they will look at your spouse’s credit history, it should not affect your chance to obtain financing for a home. If you decide to apply for a loan together, both of your credit scores will be taken into account.
Take Community Property Laws into Account
In some states, there are regulations called community property laws. Community property laws state that the non-purchasing spouse’s debts must be included in the borrower’s debt-to-income calculations. Even if you think your spouse can be a non-purchaser, you should double check with your mortgage loan officer.
The addition of the non-purchasing spouse’s debts into the debt-to-income ratio may stop the borrower for from acquiring the home loan. Community property laws also mean that all assets acquired during the marriage are considered “community property.”