Love is in the air, and so are loan profiles for newlyweds. In fact, when they apply jointly for a mortgage on that “perfect” home, there are vital things they need to know about the new world of joint financing after marriage.Here are five of them.
1. How Low Do You Go?
When a married couple applies for a home loan, the spouse whose FICO score gets used is whoever has the lowest. So if one person has a 740 credit score and the other has a 680, guess what? The 680 score is the one a mortgage lender is going to use.
The difference between a 680 and a 740 can mean a lot of moola! Adequate mortgage planning with a mortgage professional can help homebuyers navigate both their credit history and scores to ensure they are in the best possible position not only to get approved, but to get the best deal.
2. The Ghosts of Credit’s Past
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A negative credit history can haunt anyone. Being married, however, it can possibly keep a loved one from being added to the mortgage. Does your husband have a judgment against him? Does your wife have open liens? These are some examples that can roadblock someone from being added to the mortgage.
Why is this important? Anyone who plans on using both spouses’ income to qualify for a home loan must use both credit scores. The best time to learn about each other’s history is BEFORE the house-hunting commences. No one likes to be let down, so plan ahead.
A higher credit score can mean a better interest rate, among other perks. Just know that when it comes to boosting credit, there are many ways for newlyweds to help each other. It can be as simple as paying down credit-card balances.
4. Go It Alone … Maybe
It may be in a couple’s best interest to obtain a home mortgage in only one of the spouse’s names, even if there are no credit hurdles. This statement often leaves people scratching their heads.
Well how about this scenario: If Jack and Jill put the mortgage (not the deed to the house, which is different from the mortgage) in both of their names, and later they want to purchase an investment or vacation home, they may have tied up each other’s income, prohibiting or reducing their capacity to borrow money for a future purchase. If only Jill is on the mortgage, then Jack can apply for a vacation home on his own, using only his income, which is not tied to a mortgage payment on a credit report.
Some people don’t like this idea. They want to be on the loan since they will help pay for it. Just know this: In Florida, when married people purchase a primary residence, they will typically be listed on the title to house as a “married man/woman.” This means that even if one spouse is not on the loan, he or she will still have an ownership interest in the property. Don’t mistakenly think that if Jill is not on the mortgage or note, she is giving up any ownership to the home. In Florida, it’s generally not true.
If your spouse is active or prior military, he or she may have an invaluable benefit with a VA loan. The VA loan carries very low interest rates comparative to the market. Furthermore, you do not have to make a down payment if you qualify. This is worth investigating.
At the end of the day, it is in your best interest (literally) to work with a licensed mortgage professional who can provide insight, advice and planning before you begin your housing search. With a pro on your side, you can ensure your loan process is not only fast and smooth, but also that you’ve taken the necessary steps and consideration to save money on your interest rate or the closing to your future home.
If you have questions, scenarios or simply want to guarantee you are getting the best deal on your home mortgage, call the experts at The Florida Mortgage Firm for a free, no-obligation consultation. Our team is filled with professionals who will guide you through your options without the annoying sales pitches.
For honest, straight-forward advice on various programs at competitive rates and costs, give us a call or simply click the big, blue button. Your marriage will be happy you did.