Ask Kate about 1st Time Home Buyer Flying Solo

by Andie H.
(Georgia, USA)

Ask Kate about 1st Time Home Buyer Flying Solo: Kate, I am 25 years old now. I have been dating the same man since 2007. The idea to marry is there, but the plan has not progressed beyond that.

Andie continues... I recently graduated from college and I am ready to begin a career. Unfortunately, the realm of teaching is very limited with available positions, therefore I went with my back up plan... hospitality.

I have been saving while in college. I currently have about $3,000 to put down and am still saving more. I have a solid emergency fund, and my credit score is 767; I do not owe any student loans (I worked three jobs in college, plus some scholarships).

I plan to buy a house by the time I am 28 years old, but I feel that my "partner in life" may possibly bring me down financially.

My questions are:

1. Do I have to have a co-borrower when purchasing a home if my credit score is good and I can afford the payments on my own?

2. Thinking proactively, if I need a co-borrower to sign with me, how can I remove that name if the relationship does not work out (i.e divorce) without too much hassle or losing out on thousands of dollars?

I do have time to decide... I have three years to plan, but I am one who likes to plan ahead.

Warm Regards, Andie M. H.

Kate Answers 1st Time Home Buyer Flying Solo:

Dear Andie,

From one trouble-shooter to another, let me say I understand looking ahead. It seems to come with the territory, doesn't it? :)

So, let's talk about your first question - When is a mortgage co-borrower necessary? Or another way to say it is - Will a 1st time home buyer flying solo get mortgage loan approval?

Women as 1st Time Home Buyers

Although it might seem like the dark ages to someone fresh out of college, believe it or not, it has not been that long since women had to prove they were on birth control, in order for a mortgage lender to consider their income!

In the grand scheme of things, we've come a long way, baby! So if you qualify for a home loan, no, you do not need a mortgage co-borrower.

Affording Mortgages vs Qualifying For Mortgages

You might not know you brought up my favorite topic, affording vs qualifying for a mortgage. Generally a co-borrower has little to do with the affordability factor. Most 1st time home buyers add co-borrowers because they can't qualify for the mortgage. They know jumping through the hoops of adding a more qualified co-borrower might tip the scales in favor of mortgage loan approval.

However in reality, the lender understands the co-borrower, especially one who will not occupy the subject property, was enlisted to push the loan through the convoluted system - Not to contribute toward the mortgage payment.

(Sidebar: In spite of what I just said, anyone who has co-borrowed for a mortgage should understand their credit history is on the line should the monthly house payments go past the grace period.)

So differentiate between needing a co-borrower for affording a mortgage vs qualifying for one. My best and warmest advice is to decide on your own what you can afford in a house and don't go past that amount, regardless of what you are qualified to borrow in a mortgage.

But onto more about qualifying for a mortgage (and even though I may sound like a broken record, this amount may be different from the amount you can afford in a mortgage). If your credit scores, credit and job history, verifiable savings, as well as your income and debt ratios meet lending guidelines, you do not need a co-borrower.

Who Owes vs Who Owns After a Break-Up

Okay, now onto your second question, how would a home owner go about removing a name in the case of a relationship break-up? There are two things to consider here. Names on the mortgage and names on the deed. Mortgage relates to owing and the deed to owning.

I have been asked this many times because it is a confusing subject. So I'll say it again. If co-borrowers who are also co-owners decide to part ways, there are two things to consider - Removal of names from the home loan which usually requires mortgage refinance (the debt instrument) and removal of names from the deed to the property (the asset).

Before I send you to a few pages on my website to read about this in more depth, consider this. If someone borrows with you to buy a home, you are both 100 percent responsible for the repayment of the mortgage, in the lender's eyes. In most cases, you are also both 100 percent in ownership of the property.

So you probably can guess what I am about to say now. Consult an attorney if you have any questions about percentage of real estate ownership. Although it may cost you money now, it could save you in the future.

Go here to Do Quit Claim Deeds Protect Credit Score Ratings for important information on property ownership. You will also find more links on this page leading you to even more help.

Comment & Link

Andie, one more thing. Is this page helpful to you? I'd like to hear back from you.

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Best wishes,

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