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"Mortgages can be fun!"

(said no one ever)

But It Doesn't Stop Us From Trying

 

Mortgage After Marriage: The essential guide to home financing for newlyweds

For many newlyweds, buying that first home together is a rite of passage. Surprisingly, the milestone of homeownership is growing in importance even when compared to the wedding. Yes, I know this this sounds like blasphemy so before you light the torches and barge into our offices, know this: in an OpenDoor survey of 500 couples, 64% were OK with a delayed or downsized wedding if it meant that they can buy a home sooner. For participants between 35-44, this jumped to 70%. What we sometimes forget is that, similar to weddings, there’s an emotional factor to homeownership that goes well beyond the actual financial investment and return.
 

 

Homeowners believe that a home is Where You Make Memories

 

However, there is financial groundwork needed for joint homeownership that many couples ignore. Why you ask?

 

Well, as I’ve discovered first-hand by being in love (and also being in the mortgage biz since 2002) it’s that people in love behave irrationally. It’s why I stock up on my heart shaped dark chocolates on February 15th every year. It’s also why some of the earliest post-engagement feuds happen over four letter words like FICO and debt. According to a survey of people in a relationship or partnership by SunTrust Bank, 35 percent of all respondents experiencing relationship stress said finances were the primary cause of friction.

 

causes of stress in a relationship

 

…and despite some fine reality television made about Bridezillas, in that OpenDoor survey, the majority of participants said that saving and buying a home was actually more stressful than saving and planning for their wedding. As the notorious children’s taunt goes:
 

first comes love,

then comes marriage,

then comes a mortgage with an unnecessarily high interest rate…because hubby forgot to return his cable box in 2016

Seven out of ten American men and women enter into matrimony with some amount of debt – primarily credit card and student loan debt. This is why we want to stress that financial transparency is critical BEFORE tying the knot. So, what do you need to go over?
 

The Good, Bad, and the Straight Up F’ugly

Now without fear of judgement (and annulment), close your eyes, and reveal your true selves (aka your financials) to your significant other:

  • Credit score
  • Debt
  • Bankruptcies
  • Foreclosures
  • Child support
  • Financial Assets & Income
…and yes, we realize that sometimes it can be awkward bringing up these sensitive topics so here are a few prompts to get the conversation rolling:
  • Did you know that FICO is slang for “cool” in Italian? So, on a scale of 300 to 850, how, um, cool are ya?
  • You know I love everything about you. SO how much debt should I plan to love?
  • Start an innocent game of “I have never”. Mid-way, say “I have never been bankrupt”. A bit later…”I have never foreclosed on a property”
  • You got any kids? Because I could turn into the Wicked Stepmother real quick depending on how much the child support payments are.

Reality Check: if he drops you because of your credit score, it wasn’t meant to be, ladies & gents. Hiding away those kids on the other hand…

Ok, now that you’ve revealed your FICO, BKs, Foreclosures, and closet children, it’s time to get your spending habits out in the open.

Start with a deep dive into your bank and credit card accounts. Most banks will group monthly and annual expenses into categories like rent/mortgage, travel, meals, entertainment, etc. Make sure to rely on the actual spending records vs each others’ recollections…since your imagination will conveniently fudge any numbers it can, to keep your ego in tact.

Don’t believe me? The SunTrust survey found that people are more than twice as likely to say they are the “saver” and their partner is the “spender”.

That means there are a lot of people out there whose imaginations are cooking the books. Laying these cards out on the table will avoid big surprises later…and will also prep you two for some important decisions like:

  1. Are we doing a joint checking and/or savings accounts or keeping accounts separate?
  2. Are we gonna be single income or dual income? Will that change when we have kids? Sidenote: DINK* envy is real!

*DINK stands for Dual Income No Kids

The Big Questions to Prepare Newlyweds for Homeownership

  1. Where are we gonna live and what/who should it be near?
  2. Are we planning to buy vs rent?
  3. Do we need a home big enough for kids? This one should be obvious by now, but you’d be surprised…
  4. Are we city slickers, country bumpkins, or suburban soccer mom and/or dads, property moguls, or digital nomads?
 
Besides these whoppers, there are a bunch of practical mortgage questions from co-borrowers that we routinely answer. Here are the top financial questions that couples have when planning to buy their first home:
 
Whose credit score is used when qualifying for a mortgage?

Lenders will use the lowest mid credit score of all borrowers. The “mid credit score” is the middle score returned by the three credit score bureaus: Equifax, Experian and TransUnion.

Do we actually need to have 20% as a downpayment to purchase a home?

No but in some cases it’s advantages especially if you want to avoid paying mortgage insurance (PMI).

If my spouse makes more than me, should I still be on the loan?

If you can qualify with only one person on the loan, there aren’t many scenarios when it actually makes sense to have both people on the loan IF only one person can qualify.

If my spouse isn’t on the loan, can they still be on title as an owner of the home?

Yes, they can still be on title for the home. If you don’t want them on title, they’d need to sign a quit-claim deed (even if they aren’t on the loan).

Now with your due diligence out of the way (presuming you are planning to purchase a home) it’s time to house hunt. As you’ll see below, you may want to start some of these steps before getting hitched. Just keep in mind, there are some relationship landmines ahead.  

Get a Head Start on Planning Your First Forever Home!

Some would call this the “fun part”. This is where you take your dream home off your vision board and begin to realize it. Btw if you find that you want drastically different things in that dream home, the fun doesn’t last for long…but it’s still important to know!

  1. Where?
  2. How much space?
  3. What condition?
  4. What features?
  5. How big of a backyard is needed so the in-laws have a place to sleep?
  6. How dare you make my mamma sleep outside?!

One way to get these questions answered, is to make a list of the features that you need vs want in your home. If you want to live dangerously, make your lists independently and review each others answers. Welcome to your first argument about buying a home!

Want a pro tip?

  Ask a pro! Involving a local realtor is a great way to navigate these criteria within the context of the local property market. They are also a good third party to settle disagreements in your needs & wants criteria list.   These answers will inform the dreaded question: how much is it all gonna cost??! Disclaimer: the fun part is now definitely over. As a consolation prize though, you can now start referring to your significant other by a new pet name, co-borrower.   When it comes to cost, couples often disagree on how much money they should spend on a home. We’ll get further into it in the next section, but a rule of thumb that financial advisors use is that your monthly mortgage payments should be no more than 25% of your take-home pay aka your post tax monthly income.  

Get a Head start on planning TO AFFORD your first forever home

    Talking to a mortgage pro early on is a good way to get an understanding of where you need to be financially and credit-wise when the time comes to buy together. After all, surprises are rarely good when it comes to home buying. Also don’t forget – just because you can get approved for a mortgage up to a certain home purchase price, doesn’t mean you should! You need to do what’s comfortable for BOTH of you.   Remember how high finances ranked in terms of relationship stressors? So if you want to prolong that honeymoon glow for as long as possible, minimize “monthly payment” stress as much as possible.   Also keep in mind you don’t want to actually get pre-approved until you are seriously looking for a home because that pre-approval won’t last forever. Once it expires, a credit check is needed for a new pre-approval…and repetitive hard credit checks aren’t good for your score.  

Work on your credit together

Speaking of credit…credit scores have a heavy influence on interest rate. It also fluctuates and plenty can be done to improve it especially if you’ve got time. Find a credit repair specialist if either of you have scores lower than 650. They ain’t free, but probably the savings from a lower interest rate are well worth it in almost every situation.  

Be real about whether you are buying a forever home or a stepping stone

Now you know what kind of home you want AND what you will be able to afford. It’s time for the reality check: do they match up? There’s no shame in admitting your first home as a married couple may not be the forever home. Make the best housing decision for your finances and just keep improving your situation so you can eventually get where you really want to be. After all it’s not a forever home if you can’t afford it forever. So rent for a while if you need to…or buy something that may not meet all the “want” criteria you listed. Another option is to buy something that has rental income potential like a getting a duplex or even taking in a roommate. It’s actually more common than you’d think especially in the pricier areas. A Trulia study found that every $100K increase in median home value in metro areas corresponds with a 0.25% increase in the number of married couples with roommates…and adult children don’t count as roommates btw.  

Don’t get discouraged

  There are some tough topics to navigate in getting that first home after marriage. Even once you’ve got it, you’re going to have to live with that payment for years. So stay disciplined when it comes to those splurges and always remember that you can get your heart shaped chocolate for up to 75% off if you just wait until February 15th. Just leave me some of the dark chocolates or else!  


PS Check out our simple eval process where you can choose whether you want to: get real rates specific for your scenario (beware of teaser rates!), see how much home you can afford, get pre-approved, or quickly submit your contact info so we can get back in touch.

 

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The Turnkey Foundation, Inc. d/b/a Arbor Financial Group is an Equal Housing Lender. In all jurisdictions, the principal {NMLS: 236669} licensed location is 2932 Daimler Street, Santa Ana, CA, 92705. {Julie Aragon MLO #250691}