mortgage question

**gmarie** · 12-01-2010, 10:36 AM

I have a few friends with bad credit/ debt who got married, and their spouse (who had good job, credit, no debt) bought a house in his name only. How do banks justify this? Aren't married people jointly responsibility for all debt? So, shouldn't banks be underwriting both spouses since the spouse buying the house is responsible for his wife's debt and paying her debt can affect his ability to pay the mortgage?

For the friends in question - one was a loan through the military program, and the other was a first time home buyers program and was fully underwritten by the bank. (no mortgage brokers were used).

**Greebo** · 12-01-2010, 11:05 AM

Originally Posted by gmarie

I have a few friends with bad credit/ debt who got married, and their spouse (who had good job, credit, no debt) bought a house in his name only. How do banks justify this? Aren't married people jointly responsibility for all debt?

No

Lemme throw this what if at you.

You get married.

Your spouse keeps from you that he is a gambling addict.

Your spouse takes out, unbeknown to you, dozens of credit cards to finance his gaming fix. He loses, goes totally broke, and commits suicide.

You married him - shouldn't you be liable for the debt he took out w/o you knowing about it?

That's what you're saying.

So, shouldn't banks be underwriting both spouses since the spouse buying the house is responsible for his wife's debt and paying her debt can affect his ability to pay the mortgage?

You're wrong about the first part - so you're wrong about the second part.

**HappyMama** · 12-01-2010, 11:16 AM

Originally Posted by gmarie

I have a few friends with bad credit/ debt who got married, and their spouse (who had good job, credit, no debt) bought a house in his name only. How do banks justify this? Aren't married people jointly responsibility for all debt? So, shouldn't banks be underwriting both spouses since the spouse buying the house is responsible for his wife's debt and paying her debt can affect his ability to pay the mortgage?

For the friends in question - one was a loan through the military program, and the other was a first time home buyers program and was fully underwritten by the bank. (no mortgage brokers were used).

In most cases, the spouse does not have to be on the loan if they are qualifying for an FHA mortgage, however the spouses liabilities will be taken into the factor for your Debt to Income Ratio (DTI). In conclusion the borrower of the loan will have to qualify with the liabliites of the spouse. This may be very state specific. Once the loan closes the other person can even be added to the title.
Same for conventional loans.

I do know of one couple who told me later they lied about being married to get a FHA without her on it, or they wouldn't qualify as she had bad credit etc, to me that was horrible , not ethical , not moral and not cool. By the way I am not a loan officer.

**karichelle** · 12-01-2010, 11:26 AM

Generally it's not advisable because then the spouse has no rights to the house if they should get divorced, if his or her name is not on the mortgage. But no, a spouse is not automatically responsible for the other spouse's debts, if his or her name is not on the account as a co-signer.

**gmarie** · 12-01-2010, 12:44 PM

Thanks everyone for responding. I am clueless, since I have never had a mortgage, and only recently got married.

(and for the record, we have joint accounts, see our debt as joint, and hopefully in the next few years will be applying for a mortgage in both names)

However, I've always been curious as to how these people can get away with things like putting a car loan in one spouses name so it looks like they can "afford" a higher mortgage. It seems dishonest to me and I never understood how it was even possible.

Thanks again!

**Greebo** · 12-01-2010, 12:50 PM

Originally Posted by gmarie

Thanks everyone for responding. I am clueless, since I have never had a mortgage, and only recently got married.

(and for the record, we have joint accounts, see our debt as joint, and hopefully in the next few years will be applying for a mortgage in both names)

However, I've always been curious as to how these people can get away with things like putting a car loan in one spouses name so it looks like they can "afford" a higher mortgage. It seems dishonest to me and I never understood how it was even possible.

Thanks again!

I'm all for doing things as a partnership. But the reality is you are still two separate people - and banks have to treat you as such.

When we refinanced our house the mortgage stayed wholly in my name - because Ceashels has almost no credit history and that would have hindered the mortgage process. So we put ceashels on the deed and the mortgage is just in my name. No big deal - if something happens to me, there's more than enough insurance in place to pay off all of our real estate AND my mother in laws real estate as well, and the house was mine before we married - it was my debt then, it's "my" debt now. (Even though the mortgage is paid from OUR money right now.)

**MaryCarney** · 12-01-2010, 01:15 PM

It's really no different (albeit on a much smaller basis) than one partner buying anything on one's own while married. Sears doesn't care if your spouse has bad credit - they just want to know if YOU have enough resources to buy that lawn mower.
If the mortgage company is satisfied that one spouse has the assets to repay a loan without taking the others' income or credit problems into account - how could this be 'wrong'?

**stinkbug** · 12-01-2010, 02:24 PM

When dd bought her house, she bought it by herself. Her dh had horrible credit due to a nasty divorce.....with her good credit, (and good income) they got a better rate. All their money is joint, so it's a non issue as far as they are concerned. Just paperwork.

**gmarie** · 12-01-2010, 02:55 PM

Originally Posted by MaryCarney

It's really no different (albeit on a much smaller basis) than one partner buying anything on one's own while married. Sears doesn't care if your spouse has bad credit - they just want to know if YOU have enough resources to buy that lawn mower.
If the mortgage company is satisfied that one spouse has the assets to repay a loan without taking the others' income or credit problems into account - how could this be 'wrong'?

To me, it feels somewhat wrong to take out a car loan and put it in your non-working spouses name so that you can qualify for a higher mortgage in your own name.

**Greebo** · 12-01-2010, 03:04 PM

Originally Posted by gmarie

To me, it feels somewhat wrong to take out a car loan and put it in your non-working spouses name so that you can qualify for a higher mortgage in your own name.

It's stupid for a number of reasons.

But as long as the paperwork with the bank is filed honestly, if the bank approves the loan, it's not *wrong* cause it's not deceiving the bank.

**scottp999** · 12-01-2010, 03:04 PM

If you both fill out the application, the lender will take the lowest credit score of the two in determining pricing (interest rate) and decision.

One person can apply, but that person better have enough income to get the amount of loan needed for the purchase.

**Nishu** · 12-01-2010, 04:08 PM

Originally Posted by gmarie

To me, it feels somewhat wrong to take out a car loan and put it in your non-working spouses name so that you can qualify for a higher mortgage in your own name.

The non working spouse probably isn't going to get a car loan in their name for the same reason a non working spouse wouldn't get a mortgage in their name. How would the non working spouse qualify for a car loan?

**gmarie** · 12-02-2010, 08:15 AM

I don't know, this is what he told me... if I am remembering correctly, I think they did buy his first house when they were still in teh army... so she must have had an income then. but he told me that he keeps all debts in her name to qualify for a higher mortgage. at the time, it sounded fine to me, but when I think about it now, and how hard DH and I are working to pay off both of our debts, it bugs me a little. ;-)

**littleplum** · 12-04-2010, 12:30 PM

Originally Posted by karichelle

Generally it's not advisable because then the spouse has no rights to the house if they should get divorced, if his or her name is not on the mortgage. But no, a spouse is not automatically responsible for the other spouse's debts, if his or her name is not on the account as a co-signer.

That's not true. Only my husband is on our mortgage, because I had a foreclosure on my credit 5 years before we purchased the house. (It sold for double the mortgage amount before I was evicted by the bank, but once the foreclosure process starts, it stays reported on the credit report.)

However, even though our LOAN is in my husband's name only, I am listed as an owner of the home. I believe it's listed as Tenants In Common. Should my husband die, I own the home entirely. I will have to pay off or refinance the mortgage, but I have full claim to this house.

In the unlikely event that we divorce, I am entitled to 50% of the equity of the home.

**nodmicks** · 12-04-2010, 12:46 PM

I don't see the problem with taking out a loan in one spouses name only as long as they have the income and credit score to cover it. I have taken two cars loans solo in the 20 years I've been with dh just because it is hard for him to be able to GET there to sign papers. I our state they send out a "tattletale " notice to your spouse if you take out a loan.

Now if they are doing it to get more and more bigger loans etc thinking they are pulling one over on anyone....... I guess that is their problem when their house of cards crumbles.