Married and buying a home? Knowing this could save you financial ruin down the road. Put one spouse on title and one on the mortgage, I’ll tell you why and how it can save your credit and big loot down the road.
You may be inclined to go after a slightly better interest rate if you and your spouse both have good credit, however, that might a terrible idea. The fact is, if you’re both on the mortgage and something terrible happens (similar to the recent housing bust), you’re both screwed if you were forced to foreclose or strategically default. That’s right, both of your credit scores are going to plunge 100 to 200 points.
But why would you take that risk when you don’t have to? Instead, if you would have put the mortgage in only one persons name, the other spouse would have been able to avoid a credit hit, and obtain another mortgage much quicker than if both would have defaulted.
There are some risks to this that maybe more obvious to others and I’ll point them out now; State laws vary, consult a professional in your area to make certain (as a spouse) you can’t be held liable for your spouses debts. In addition, some states may deny loan funding if a spouse has defaulted recently. Moreover, there is an inherent risk when one spouse is granted ownership of the home without any liability, that is they can only win and not lose if something goes wrong. Another obvious downside would be that one spouse alone probably won’t able to qualify for as good of rates as if two spouses were on the mortgage. In summary, in most cases it makes sense to protect one spouses credit, to protect both spouses future.