Sometimes, it makes sense for only one spouse’s name to be on the mortgage

Most married couples who buy a home take out a mortgage together. Frequently, they need both spouses’ income in order to qualify. But in a surprising number of cases, it can make sense for the couple to own the home jointly, but for only one spouse to obtain the mortgage.

Here are some advantages to this arrangement:

  • If one spouse has a checkered credit history, this might make it difficult for the couple to qualify for a loan together – but the other spouse might be able to qualify by himself or herself.
  • When a couple applies for a mortgage, and they have different credit scores, lenders often use the lowest credit score to determine the interest rate and other terms. So it might make sense for only the spouse with the higher credit score to apply. Sometimes, even a difference of only a few points on a credit score can matter significantly in how much the couple has to pay on their loan.
  • Sometimes one spouse will have bought a home not long before the marriage. While the couple might want to refinance so they can both be on the loan, interest rates might have changed in the meantime, and they might not be able to get as good a deal as they already have.
  • Some couples want to keep one spouse off a home mortgage so that spouse won’t be burdened by the mortgage obligation and can better qualify for other types of loans, such as a car loan, a student loan, or a mortgage on an investment property.
  • It’s not uncommon for one spouse to have a regular salary while the other is self-employed, or has highly variable income based on bonuses, commissions, or seasonal employment. The nature of the second spouse’s job might lead to a lot of additional paperwork and documentation requirements, and delay securing a loan. If the first spouse has enough income to qualify, leaving the second spouse off the mortgage can make everything quicker and easier.
  • If there’s a chance that one spouse might lose his or her job and be unable to make the house payments, the other spouse’s credit wouldn’t be affected.

You should note that even if only one spouse’s name is on the mortgage, the other spouse can still contribute to paying for the home. For instance, the non-borrowing spouse can give funds to the borrowing spouse for the down payment, and can also contribute toward the regular payments each month. If a married couple files separate tax returns, the non-borrowing spouse can generally deduct mortgage interest for any amounts he or she actually paid during the year, although some restrictions apply for very large loans.

You should also note that in some states, especially what are called “community property” states, a lender might look at both spouses’ credit scores and debts even if only one is applying for the mortgage.

Finally, a possible drawback to this arrangement is that the non-borrowing spouse won’t have a chance to develop a solid credit history, because the mortgage payments won’t be attributed to him or her. If the borrowing spouse dies, or if the couple gets divorced, the non-borrowing spouse might find it difficult to establish credit.

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