Married Couple Buying a House Under One Name: Pros and Cons

Buying a house as a married couple is a significant step in your partnership. This could potentially be the home where your kids grow up or where the two of you make countless happy memories.

Homeownership is exciting, but it is also a major financial investment. How you buy your house could impact your finances for several years – if not decades. You have a choice when you apply for a mortgage: one partner can apply for the loan or both of you can work with the lender.

There are pros and cons to each choice and the decision ultimately depends on your specific financial situation. Use this guide to learn when a married couple buying a house under one name is a strategic move and when it is a liability.

Mortgage Application Considerations for Married Couples

The first thing to know is that both spouses do not need to be on the mortgage. One person must work with the lender to submit an application and complete the loan process.

Before you decide who will apply for the mortgage, look at your finances. Consider whether they are stronger together or where you are better off applying as a single owner. Here are a few reasons why one person might want to apply along with potential drawbacks of doing so.

Advantages of Single-Spouse Mortgage

There are two main reasons why one spouse would apply for a mortgage but not the other.

First, one partner might have a stronger financial profile than the other, to the point where the other spouse brings their application potential down. The second is that both parties want to protect themselves in the event of a divorce or separation.

It is easier to split when one spouse is on the mortgage. Below are a few advantages in greater detail.

Navigating Poor Credit Scores

When you apply for a mortgage as a married couple, the lender looks at both of your credit scores. If one person has a poor credit history, it could make your application less desirable.

Most experts say a credit score of around 620 is required to qualify for a loan, though some lenders will approve applications with scores in the 500s. If one spouse has good credit while the other doesn’t, applying as a single person might be a better choice.

Interest Savings

Poor credit scores can also increase your interest rate offerings from lenders. Even if your spouse has a high enough score to qualify for a loan, the lower score could make your mortgage more expensive. Here are just a few ways that credit sends ripple effects through the home-buying process: 

• Higher interest rates lead to higher monthly mortgage payments.
• Higher monthly payments can cause you to reach your lender’s debt-to-income ratio limit, restricting the size of the loan you receive.  
• Paying more in interest lowers your home buying power because a larger percentage of your monthly payments covers the mortgage loan costs. 

You might discover that you need to reduce your home-buying budget because of higher interest rates caused by the credit score of one spouse. This could potentially push you out of desirable neighborhoods or out of your ideal home size.

Asset Protection

It used to be common for couples to combine their finances when they were married; however, more people are keeping their assets separate to protect themselves and maintain financial independence.

One study found that 46% of adults in relationships keep their finances separate. This is even higher for younger generations. 

If one spouse falls into debt, the collections agency cannot come for the assets of their partner. This is another benefit of keeping the mortgage under one person’s name.

Additionally, if the house falls into foreclosure due to missed mortgage payments, only one person’s credit score would be damaged.

Divorce Considerations

No one wants to think about divorce, but it is an important consideration for any couple that is merging their finances. If only one person is on the mortgage and title, then they can continue to own the house if there is a separation.

Splitting up will be easier and require less paperwork. Not only will you have to remove your partner from the loan and deed if you are both listed there, but you will also have to make sure you can pay for the house by yourself. 

It’s not uncommon for divorcing couples to sell the house they bought together because it is the fastest way to break up their assets. 

If you are already married, consider signing a separation agreement or postnuptial agreement before you close on the house. It is better to explain who gets what assets in writing and never need it than to divorce without any idea of how to divide your equity.

Estate Planning Simplification

Placing one person on the mortgage can also help with estate planning. If the owner of the house dies, they can name their spouse as the beneficiary. The ownership then gets handed from one person to the next.

Selling a house when one person on the deed is dead can get complicated and requires documentation like death certificates. 

Similarly to divorce, no one wants to think about death, but it’s important to plan for this inevitable event.

Disadvantages of Single-Spouse Mortgage

Keeping only one spouse on the mortgage is the easiest option in most cases, but it comes with multiple drawbacks. You might not even be able to buy a house with only one person’s finances represented. Here are a few reasons why this is a bad idea.

Reduced Buying Power

Presenting a single income will limit the size of your loan and the property you can buy. Mortgage lenders look at debt-to-income ratios when they estimate monthly loan payments.

If your gross monthly income is $5,000 (your earnings before taxes) and you have no other debts to pay, your maximum monthly payment would fall around $1,800 for a 36% debt-to-income ratio (which is the maximum for many lenders). 

Conversely, if your partner also earns $5,000 per month, bringing your household income to $10,000 per month, then your maximum loan payment would be close to $3,600. 

Depending on the home prices in your area, you might need your partner’s income to increase your buying power and bring your DTI down to a reasonable level.

Remember, your mortgage payment will cover the principal of the loan, interest, private mortgage insurance (PMI), property taxes, and home insurance. In high-cost-of-living areas, a $1,800 monthly payment won’t allow buyers to get homes in the areas they want.

Higher Home Insurance Rates 

If both partners are on the mortgage, you might save money with lower homeowner’s insurance rates. Insurance companies sometimes charge married couples less because they are less likely to file claims and more likely to have the financial ability to keep the property in good condition.

You might end up paying more if only one person is on the home documents because of these insurance costs.

Claim Assets During a Divorce

While a joint mortgage makes it possible for two people to separate amicably, it can be challenging for people who divorce on bad terms. The person not on the mortgage or title will have to prove that they are entitled to some of the assets if they put any money into the property. 

There are legal protections for people who aren’t on the mortgage of a home. However, you will need to track how much you put into the house and the equity you earned if its value increases. Once again, this is another benefit of a separation agreement before buying.

You can document in writing what each person contributed to the purchase and will pay in terms of mortgage, utilities, and renovation costs.

Scenarios When a Married Couple Might Buy a House Under One Name

Every couple has different finances and personal beliefs about marital property; however, there are a few instances where there might only be one spouse on the mortgage.

Here are a few examples of when this might happen.

High Income but Poor Credit History

A low credit score can prevent someone who makes a good income from buying a house. The couple might decide that one spouse’s income is enough to secure a loan, even if both parties will contribute to the mortgage.

This could be viewed as more effective for couples than receiving a higher interest rate to increase their overall buying power.

Refinancing Considerations

When both parties are on the mortgage, both spouses need to approve a mortgage refinancing. This process essentially involves reapplying for the loan under more favorable terms and presenting your financial information once again to the underwriters.

People refinance when they separate, when they can secure better interest rates, or when they need to pull equity from their homes. However, your finances can change over time. You or your partner might not have stellar credit or enough income to get favorable refinancing terms. 

For example, if one spouse decides to become a stay-at-home parent, you both lose the portion of the buying power their income brought in. Your DTI might increase to a level your lender isn’t comfortable with. Similarly, one spouse could take out a car payment, return to school, or take out loans for other reasons, further affecting your DTI. 

Keeping one person on the mortgage while the other spouse handles different financial aspects of the marriage could be a strategic move if you refinance in the future.

Title vs. Mortgage Arrangements

There’s a difference between keeping your spouse off the mortgage and leaving them off the title of the property. The title states who owns the house. Meanwhile, the mortgage lists the parties who are responsible for paying for the property.

Both parties can be listed on the title even if only one person is on the mortgage.

If your partner wants to have an ownership interest in the house but it’s not financially viable to include them in the mortgage, you can add their name to the title. Then, the person with better finances and a higher credit report can apply for the mortgage alone. Both parties will own the house, but only one person will be liable for missed payments.   

This is usually a preferred option when only one spouse brings in a steady income but both parties want to be represented as owners. However, in the event of a separation, you will have to remove your ex-spouse from the title.

Community Property Laws

Another factor to consider as you decide who is on the mortgage and who is added to the deed is the type of state you live in. In community property states, all assets and debts and split evenly during a divorce.

For example, if you buy a house and pay it off, then divorce your spouse, you would split the profits from the same evenly. Debts are also split evenly between the divorcing couple. 

These are the nine community property states: 

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

You can disregard the community property laws if you have a valid prenuptial or postnuptial agreement. If both partners agree to divide their assets in a specific way that is different from community property laws, then they can use these agreements to spell out their desired terms. 

If you do not live in one of the community property states, you will likely follow common law guidelines. The asset you acquire is yours unless you acquire it jointly. If you use your own money to buy a boat to go fishing on the weekends, that asset is entirely yours. However, if you both pool your funds to buy a boat, then it is owned by both of you. 

If you live in a community property state, know that one spouse will still have rights to the house during a divorce even if they aren’t on the mortgage or deed, unless there is a prenup.

Government-Backed Loans

The laws for community property states can affect your ability to get a loan with your current spouse. While most people think about dividing assets during a divorce, the credit and finances of your partner can affect your ability to get a loan as well. 

Lenders of government-backed mortgages (FHA loans, VA loans, and USDA loans) are required to pull the credit history of spouses who are applying for loans. This means that even if only one partner is applying for the loan, the lender will look at the finances and credit of both parties.

If you live in one of the nine community property states, you might decide to both apply for a mortgage to maximize your buying power knowing that your lenders will check the credit of both spouses anyway.

Alternatively, you can wait to improve the credit of your significant other over a year or two so your loan applications receive better interest rates. Know that the housing market and interest rates can change during that time for better or worse. Your financial situation might be different as well.

Quitclaim Deeds

If you need to transfer ownership of the house, you might be able to do so through a quitclaim deed. This is used when property exchanges hands but money doesn’t.

For example, one spouse might purchase a house and then pass the deed to another in the event of a divorce. The person who takes over the property through the deed will continue living in the property and legally own it. 

These deeds are used so relatives and spouses don’t have to sell the house to each other. They simply change who owns the property.

A quitclaim deed highlights how you have options even if one partner can’t be placed on the title during the closing appointment. Ownership can be added or transferred in the future.

Talk to a Realtor to Discuss Your Mortgage Options

While it seems natural that both parties would be involved in the mortgage process, you might find that it makes more sense for one spouse to apply for the loan. You can represent both spouses on the title and take steps to protect yourself through pre or post-nuptial agreements.

While combining your incomes can increase your buying power, poor credit might change your buying abilities in unexpected ways. 

Before buying a house, talk to a real estate agent who works with couples. FastExpert is a great place to find local Realtors who specialize in certain markets. You can also request quotes from multiple mortgage brokers to see how different financial moves will change your loan terms.

Gaining insight from experts in the field can help you make smart financial decisions that protect your assets for several years. Start with FastExpert and take the first steps toward owning a home.