Home Loan In Community Property States
Mortgage loan applicants seeking home loan in community property states face more challenges and red tape when qualifying for a mortgage loan. Qualifying for home loan in community property states can be a challenge if your spouse has a lot of debt and/or collection accounts even though your spouse is not on the mortgage loan.
What Does Community Property Mean And What Are The Community Property States?
Home buyers do not have to include their spouse on the mortgage loan. A spouse does not have to be on the mortgage note but can own the property jointly and be on the title of the home with the main borrower of the property. If a spouse is a non-working spouse, generally the spouse is not included on the mortgage note. Also, a married couple may want separate assets where they may want to own the home by themselves and not have their spouse to have any ownership to the home. What is mine is mine and what is your is yours. This is also very common with many married couples where they are independent and have separate banks accounts, have separate asset accounts, separate wills, separate assets such as autos, jewelry, and homes. Unfortunately, there are nine states in the United States where it is called community property states where the legal structure and framework is structured where the homes they purchase is owned jointly regardless on who is on the mortgage unlike common law states where you own what you own and your spouse owns what they own. The nine community property states in the United States are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
Reason Why Not Including Spouse On Mortgage Loan
There is no reason why a married couple need to include both borrowers on a mortgage loan, even though both people have great credit and income. As long as one of the borrowers can qualify with credit and income, then only one borrower normally will go on the mortgage loan and the spouse can go on title. Having both people on the loan when only one of them qualifies just requires both people to go through the credit, income, and mortgage qualifying process. On the flip side, if a spouse has bad credit or no income, then most people do not include the spouse on the mortgage loan. Home buyers applying for a home loan in community property states may not include the spouse because of the spouse not working or having bad credit but there are times when debts and/or bad credit will make of your spouse a liability when qualifying for a home loan in community property states. A spouse’s tough financial profile can hurt the main borrower seeking a home loan in community property states whether the borrower will leave them on the mortgage loan or off the mortgage loan. Again, the nine community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
Underwriting Home Loan In Community Property States
Home ownership in community property states, a spouse who does not have his or her name on the mortgage loan note still owns the property with the person that is solely on the mortgage note. Due to the laws of community property states, mortgage lenders have tougher underwriting rules and criteria when it comes to home loan in community property states. One of the mortgage lenders major concern is that a non-borrowing spouse’s financial issues may cause the property to have a lien placed on if the non-borrowing spouse has derogatory credit issues like judgments, multiple collection accounts that can turn into liens or judgments, tax liens, or are under a lawsuit. To protect themselves and their assets, mortgage lenders often factor in the non-purchasing spouse’s credit profile such as debts and liabilities when analyzing a home loan in community property states. Home buyers who are seeking a home loan in community property states and are married will have their spouse’s debts included on their debt to income ratio qualifications and negative credit such as judgments, tax liens, and collections will be taken into account even though the spouse will not be on the mortgage loan. Home buyers in community property states should carefully prepare their finances before starting the home buying process. The good news is that most mortgage lenders will just pay attention to the spouse’s debts, liabilities, and negative credit items but will not take the spouse’s credit scores into account. If the spouse has stable reliable income, some mortgage lenders can often offset the debts the non-purchasing has. This is not very common because when the income is counted to offset the non-purchasing spouse’s debts, then the non-purchasing spouse may be required to be added on the mortgage loan.