Purchasing a New Home with a 30-Year Marriage
After the worst recession in American history, jobs are slowly coming back, and Florida home sales are finally gaining momentum. But married couples should consider more than their credit, before deciding to leave a spouse off the mortgage.
With the unemployment rate dropping, many Floridians are starting to regain some home buying power. Even through the recession, people were meeting, falling in love, and entering into marriages. While marriage brings two people together as one, it also could bring a questionable credit history to the mortgage application. Married couples should think twice before omitting the credit-challenged spouse from their mortgage.
Even with new gainful employment, formerly unemployed individuals may have left over blemishes on their credit from their job-seeking days. Late payments, disconnected cell phones, late car payments and student loans, all can make the spouse a higher risk when shopping for a mortgage. Often, the spouse with good credit will simply sign the mortgage without their financially bruised partner, in an effort to secure a lower interest rate. The couple owns the home together and the good-credit-spouse assumes all of the risk.
If the marriage lasts longer than the mortgage, this is a perfect solution. If the marriage is not as sturdy as the foundation of its newly purchased home, the mortgage signing spouse could face serious financial damages.
Florida is an equitable state wherein both spouses equally own their assets. In the event of a divorce, the assets are equitably divided between the two parties. While the mortgage may be in one person’s name, the tax bill (or deed) is in both partner’s names, thus belonging to both parties. If a divorce is disputed or gets complicated, the non-signing spouse may decide to stop contributing to the mortgage. If both incomes are needed to cover the payments, the house could go into foreclosure, as a result of the divorce.
If the spouse that guaranteed the mortgage wishes to continue to reside in the house after the dissolution of their marriage, they may have to buy out the other spouse. In this case, the new sole home owner could incur more liabilities and possibly crippling debt.
While the interest rate may be higher with a spouse that has an unimpressive credit score, it may be wiser to pay a high rate but have two spouses making payments, so that both parties are sharing the liability and the risk. In several years, when both couples have stronger credit profiles, the mortgage could be refinanced at a lower rate.
Most married couples are committed to making their relationship work. However, before purchasing a house with just one signature one should ask, “what if I don’t have a 30 year marriage?”