Whether currently married homeowners or soon-to-be married, it’s important to understand the homeownership rights when it comes to spouses and the state they reside in. Let’s breakdown spousal states versus community property states and how they impact the mortgage process for married couples.
Spousal States
In spousal states, which includes 41 states and the District of Columbia, common law property is used to determine homeownership of married couples. This means, if only one member of the married couple buys a home or acquires a property, it belongs solely to that person unless the property is specifically put in the names of both spouses.
However, when purchasing or refinancing a home, the other spouse who is not involved in the mortgage will still need to sign various legal closing documents to acknowledge they know about the loan but are not financially responsible for it. In the event of a divorce under these circumstances in a spousal state, the marital property would be divided in a way that is fair but not necessarily equal 50-50, which is called equitable distribution.
For the other spouse to be added to the mortgage and gain ownership rights, they will typically need to refinance.
Community Property States
When a married couple buys a new home or refinances in a community property state, both spouses are financially responsible for the mortgage, even if an individual isn’t listed on the loan. Therefore, both parties will need to be involved in the loan closing. These states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
Community property states allow a 50-50 split of homeownership for marital property and assets, including debt. This means one spouse’s debt may impact the Debt-to-Income (DTI) ratio when applying for a mortgage together.
To learn more about mortgages for married couples or other home financing information, contact your local Supreme Lending branch or connect with us today.