Whether you’re single, married, divorced or somewhere in between, your relationship status can have a direct impact on your ability to obtain a mortgage. It’s not that a specific relationship status decides whether you will get a mortgage, but that status can influence the financial factors a lender looks at to determine whether you are approved for a home loan. Here, Trulia.com offers seven ways your relationship status can influence your financial facts—and how that, in turn, might affect your mortgage-worthiness.
1. You’re single
A single person doesn’t maintain a double-income household, which typically results in a lower total household income. So, unless your income is high enough and you’ve already reduced all of your other debts on your own, you may not get approved for the loan you want. An option for single borrowers is to get a co-signer. That makes you less of a risk to the financial institution lending you the money, since the agreement states someone else will make mortgage payments if you fail to do so.
You’re in a committed relationship
Lenders don’t frown upon legally single individuals who are taking out a mortgage together. Applying jointly means you get to combine your incomes, but the lender still will look at the lowest credit score on the application.
You’re married
Getting a mortgage while you’re married may make the process a little easier—and help you qualify for more favorable loan terms—if you both work and have income. It also helps improve your debt-to-income ratio if you can add up two incomes and either have little debt between you or just one spouse carrying a manageable debt load.
You’re married…but your spouse has bad credit
When you apply for a loan as a couple, the lender uses the lower of the two credit scores. If your spouse has bad credit, you might not be able to qualify for the loan you want. You may need to look at purchasing a less expensive home or saving up a bigger down payment so you can finance less of the property. Or you may have to accept a mortgage with a higher interest rate and higher monthly payments.
You’re separated
Californians should be aware of state laws, which say community property is everything you own together. There are a few exceptions, including property you purchase before you’re married or after you are legally separated. Most community property needs to be sold if you split up, unless both parties can agree on how to distribute everything. Reaching an agreement here may prove challenging unless the split is uncontested by either side.
You’re divorced
Splitting up jointly held property can damage both of the ex-spouses’ credit scores. So, it’s important to work with your attorneys and possibly a financial adviser to create a strategy to avoid this. That may include living under the same roof for a time until a property can be sold. You probably also need to sell your old marital home before moving on since it’s difficult for many borrowers to take out a second mortgage while still paying down the first.
You’re recently widowed
Lenders want to know what your income will look like in the future, including actual Social Security payments or death benefits—not what you’re qualified to receive. Lenders generally want to see that these benefits will continue for at least three years. Otherwise, they won’t be used as qualified income.