Can a Husband and Wife Buy Separate Homes?

If you are looking to buy a house separate from your partner’s finances, know that you aren’t alone. There are many reasons why couples would buy separate houses, from streamlining the mortgage application process to evenly dividing assets.

Whether you are looking for a vacation house, second home, or investment property, it’s possible to buy a house without putting your partner on the mortgage or title. 

While you and your partner can keep your assets apart, some states limit how you apply for mortgages and how your wealth is divided in the event of a divorce. Can a husband and wife buy separate homes? Yes. Learn more about your options, along with the potential opportunities of drawbacks of moving forward with this real estate purchase.

Can a husband and wife buy separate homes?

A married couple can buy separate properties. In most states, the mortgage and title will only have one partner’s name, and the asset will completely belong to the individual who purchased it. This is beneficial to couples who prefer to keep their money separate or for spouses who entered unions with unequal financial situations.  

The only time a house your purchase isn’t completely your own is in a community property state. With these states, mortgage lenders look at the finances of both spouses before approving a loan. If the married couple splits up, the assets acquired during the union are divided equally regardless of who owns them.

Fortunately, you can overcome these laws with a prenuptial agreement or other legal document that illustrates how you plan to divide your assets. 

Discover a few reasons why married couples want to keep their finances separate and buy property on their own. Once you realize the benefits of doing so, you might decide to move forward with the home purchase with only one partner on the mortgage or title.

Keeping Your Spouse’s Name Off the Home Title

The first thing to know is that there is a difference between keeping your partner off of the mortgage and off of the title. You can decide whether you want them added to one of these documents or left off the paperwork of the house entirely. 

The title lists who owns the deed to the property. It essentially assigns ownership of the parcel to whoever is listed. Once you pay off the home loan, whoever is listed on the title will be the owner of the property. 

The mortgage lists who is responsible for paying off the home loan. While two people can be on the title and own the house jointly, only one person has to be on the mortgage. If one partner is a stay-at-home spouse or has poor credit, you might decide to keep them off the mortgage. 

You will eventually pay off the home loan and it won’t matter who was on it. However, the title will last for as long as you own the house. The main concern when deciding who is listed occurs with estate planning. If your spouse is your beneficiary, they will take over the property when you pass away. It might be easier to add them to the title now so they already own the house. 

Another option when you pass away is to transfer the home to your spouse through a quitclaim deed. These deeds are used to change ownership of property without exchanging money.

You can set up one of these deeds before you die to make your asset distribution easier, or you can express your wishes in your will. 

Reasons for Separate Home Purchases

Married couples used to combine their finances in a joint bank account, but this is becoming less common. With both spouses working, they want to maintain their financial independence. While they might share an account to manage house and childcare costs, more couples want their own money to spend how they wish. 

This division of finances also creates opportunities for separate home purchases because mortgage lenders can look at a single financial picture without considering the other spouse’s debts. Couples can grow their wealth and make strategic financial decisions for their futures. 

Here are a few reasons why half of a married couple would want to buy another house separately from their primary residence. These reasons can help you think strategically as you plan out your home real estate future.   

Credit Score Considerations

Credit scores play a significant role in your ability to buy a house. Most lenders will only work with buyers who have credit scores above 620 for conventional loans. While there are options for borrowers who have credit scores in the 500s, you might need a higher down payment or receive a higher interest rate to account for the risk that comes with lending to you. 

If you live in a common law state (as opposed to a community property state), one spouse can submit their credit to the lender if they are the only one applying for the conventional loan. Both parties can be added to the title, but only one spouse will take out the home loan. If you live in one of the nine community property states, the lender will look at your spouse’s debt and credit score anyway, even if your name is the only one on the loan.  

Buying a house separately from your spouse could be a good option if your partner has a low credit score or is paying off debt. It’s possible their finances took a hit during their previous marriage and throughout their divorce proceedings. You also might decide to buy a house in your name only if your partner recently took on debt by returning to school or buying a car.

Diverse Sources of Income

When deciding whether you want to buy another home separately or together, consider your buying power and sources of income. First, you want to maximize the gross monthly income you report (your earnings before taxes) because this is used to calculate your debt-to-income ratio (DTI). Most lenders will only approve a loan that brings your DTI up to 36%, which limits how much you can borrow. 

If one partner applies for a mortgage alone and earns $120,000 per year ($10,000 per month) then their maximum monthly payment would be $3,600, assuming the borrower already paid off their primary residence and doesn’t have other debts. If their spouse applies for the mortgage as well and earns $40,000 per year, their combined income is $160,000 with a monthly income of $13,333. This gives them a maximum monthly payment of $4,800.   

However, it might be easier to report one partner’s income than the other’s. If one spouse has a salaried position and receives a W2 during tax season, their finances are easy to report. If the other spouse has several freelance clients, earns money through tips, or has a less stable source of income, it can be harder to prove their worth to lenders. Applying for a home loan will be harder for them and will take more work for everyone involved. 

That said, conventional loan brokers increasingly work with people who are contractors or have tip-based jobs. It is becoming more common to see these income streams, which makes it easier for people with diverse earnings to purchase property. 

Asset Distribution

Even if both parties can afford to purchase a house together, you might decide to keep the assets separate to protect yourselves. For example, your primary residence can belong to your spouse while you take ownership of your second home or vacation property. Both spouses can work to pay off the home loan, but the assets are assigned separately. 

If you and your spouse break up, asset distribution will be easier allowing for a cleaner break. Some couples who buy houses together and pay them off equally have to sell the property when they break up. The profits from the sale of the home are then divided between each partner. By distributing your assets separately, you can both stay in the properties you love. This could be the best option if you have children and don’t want to disrupt their lifestyle. 

Maintaining separate assets could also be a strategic move if one spouse is launching a business. If an unhappy customer sues the business, they will only be able to go after assets owned by the defendant. The house is safe. This could also be avoided with liability insurance, which can protect your personal and professional assets.

Managing Joint Bank Accounts

Buying separate properties can be tricky if you have a joint bank account. You will need to share bank statements with your lender if you want a conventional loan, which means your partner will be at least somewhat involved in the home purchase. 

Before you start the purchase process, make sure the flow of cash to the account is high enough to cover the remaining mortgage of your primary residence and the new payments of your upcoming home purchase. You might decide to move some funds into this account to prevent over-drafting as you get your finances in order. 

Talk to your partner about who contributes to this account and what it is used for. This is particularly important if you have separate accounts on top of the joint one. Through these conversations, there shouldn’t be any surprise withdrawals that stretch your finances. 

Also, agree to a spending freeze during the conventional loan application process. Avoid taking on debt through large purchases or applying for additional lines of credit. These changes to your finances can hurt your mortgage application and slow the property purchase.

Future Investments

While it is understandable that you are focused on the immediate purchase of your second home, evaluate what you want from life in the next five years. Consider your big-picture goals for the next 10 to 20 years. The purchase you make now could affect your finances in the long run. 

For example, it might make sense to buy houses separately if you plan to make major purchases in the future. Your DTI will remain separate when applying for loans, allowing you to get favorable interest rates. Whether these purchases include additional home purchases, student loans, or other expenses, you want to start preparing now for the future.

Financial and Legal Considerations

Have an open discussion with your spouse before you move forward with the purchase process This can confirm that you are on the same page with your marriage and homeownership goals. It is better to answer difficult financial and legal questions openly before buying a house instead of facing them once you already own a second home. Here are some of the most common questions to ask: 

• How much house can you afford? This includes the purchase price along with taxes, insurance, homeowners association fees, and maintenance. 
• Who will be responsible for covering the mortgage and maintenance costs? 
• If you split up, who will keep each asset? 
• If both parties pay off the house equally, how will the appreciated value be divided in a divorce? 
• Will the house get passed to the spouse or children when the owner passes away? 
• How will this asset change your income levels if you use it as an investment property? 
• How will the home purchase affect your taxes when you buy and sell it? 

Taking on a second home beyond your primary residence is always more complex than basic homeownership. There are now two properties to maintain and pay for throughout the year.

Can You Get a Mortgage Without Your Partner Knowing About It? 

If you have separate finances and live in one of the common law states, it is possible to get a mortgage without your spouse knowing about it. You will want to gather your financial documents so you can easily send them to your lender and get pre-qualified to look at homes.

From there, you can search for properties and make an offer on the one you love. Your lender will guide you through the underwriting process until you are cleared to close. 

It is always easier to apply for a mortgage without your spouse knowing if you have separate bank accounts. They won’t notice that funds are leaving the account or are getting diverted to pay for the new house. If your spouse manages the family finances, changes in income levels could be an immediate red flag that something is wrong. 

Additionally, buying property is a long and complicated process, especially if you are taking on a mortgage. It might be hard to hide the stress of the purchase process from your partner. Your finances will also change once you start making payments on the house. 

Applying for a mortgage without your spouse knowing might not be the best idea. If you want to surprise them with a vacation home, bring them into the purchase process. If you are considering leaving your partner, it might be easier to separate from them before purchasing another property.

Make Informed Financial Decisions When Buying Second Homes

Consider your options if you are ready to move beyond your primary residence. If one partner has debt or a low credit score, it might be better if only one spouse is on the mortgage application. This is completely acceptable in a common law state but can get complicated in community property states. 

When in doubt, talk to experts in the field. Consult with financial advisors, mortgage lenders, and real estate agents to discuss your options. You might have more financial options than you realize to protect yourselves while getting favorable loan terms and interest rates. 

To find a Realtor once you are ready to start the purchase process, turn to FastExpert. You can find qualified agents in your desired area who can help you find your second home or vacation getaway. With the right real estate partner, you can buy property with confidence. Try FastExpert today.