Refinancing My Home in Husband's Name

by Gayle from Arkansas

Is refinancing my home in my husband's name a smart plan? Gayle inherited a home from her parents. Due to life's twists and turns, she financed it with an adjustable rate mortgage. Now she needs to refinance into a more stable and affordable loan program. Although fixed FHA loan rates look pretty sweet, she's told that only her husband qualifies. But can she remain an owner of the house, Gayle wonders.


Gayle asks Kate about FHA Refinancing in Her Husband's Name Only

Hi Kate:

My husband and I have been married for 10 years. I inherited a house and some land from my parents which has become our primary residence.

Refinancing My Home in Husband's Name with FHA Mortgage

Foolishly, about six or seven years ago (when the market in our area was still good and we were renting the house out) we took out a mortgage against the house to have cash to invest in more real estate. That turned out badly. But that's another story.

We've pretty well recovered from that mishap. But we are stuck with an ARM and have been looking to get into a fixed rate mortgage now that we've cleaned up our mess pretty well and interest rates are so low.

The best thing we've found is a FHA mortgage at a very attractive rate. The catch - only my husband can qualify for this. I would not be listed on the mortgage. Apparently, his credit looks better than mine on paper even though we are in the same boat.

My question is what would be the ramifications with regards to ownership of refinancing this way? Are we still co-owners? What if (God forbid) we divorced? I'm not asking because I think it will happen - just trying to cover the "what ifs".

My husband is totally on board with us doing what we need to do to help me feel secure with proceeding. But it feels like time is of the essence.

Can you help me sort through this or point me in the right direction? Do we need to get an attorney involved to insure that I remain a co-owner even though the loan would only be in my husband's name?

Thanks for your help.

Kate Answers: Refinancing My Home in Husband's Name

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Dear Gayle,

Concerns over ownership are often overlooked when a spouse is being removed from the mortgage during a refinance.

Both husband and wife can feel so much relief over lower house payments, they don't consider the potential of unintended consequences.

So we'll take a look at that! But first I'll propose questions for you to ask the FHA approved lender when only one spouse is going on the mortgage.

FHA Financing with Non-Borrowing Spouse

Not surprisingly, FHA adds its own twist on lending guidelines for husband and wife if one of them does not qualify for the mortgage. This is especially true when the couple lives in a community property state or the property is located in one.

On top of FHA loan guidelines, there can also be lender-specific requirements. So I recommend asking your loan professional:
  1. Will my credit report be considered in the loan package?

  2. Will any collections, liens, or judgments in my name need to be paid in full?

  3. Will my debts (such as a car payment) but not my income be considered in the qualifying debt ratios?

  4. Will I be allowed to remain on title as an owner?

  5. Are you certain you haven't overlooked a comparable loan program that would include me as a borrower?
If you can remain on title, concerns over your interest in the property may be alleviated. But as with any legal matters, it is always wise to contact an attorney.

Mortgage, Title, and Due-on-Sale Clauses

Now this could surprise you! Your attorney may point out that your husband will be bearing the total burden of the mortgage obligation while sharing co-ownership with you, assuming your lender allows you to remain on title. So while you'd both own the home, only your spouse would owe the mortgage company!

Liability vs Asset

Are you confused over the difference between mortgage and title? Here's a tip to keep the terms straight. Mortgage is to owing as title is to owning! Summed up, it's liability vs asset!
But what if your lender requires that you come off title since you won't be a co-borrower? An overly helpful friend may even advise using a quit claim deed to re-add your name back to title.

Beware! Most mortgages today have due-on-sale clauses which means a home loan could become instantly due and payable if title is altered. Ask your attorney to review your lender documents to shed light on the consequences of adding your name to title after the mortgage closes.

Don't Forget Your Credit History

One last thought. No longer being a borrower, the house payments will only be reported to credit reporting agencies on your husband's behalf. So go to Fix Your Credit Score - Fix Your Life for other ways to build up a positive credit history.

Good luck, Gayle, and best wishes with the family home,

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Purchasing a family home that is in a trust
by: Katy from St. Louis, Missouri USA

I am in the processing of buying out my siblings of a home that belonged to my parents, both of whom are now deceased. The home is in the name of my mother's trust, with my younger brother and I as co-trustees.

Besides my brother and I, there are three other siblings who are also beneficiaries to the trust. The loan company has stated that since my brother and I are co-trustees, I would have to do the loan as a refinance, and that my brother would have to sign a quit-claim deed signing the home over to me. The home would be in my name, and the loan is solely mine.

Somehow a quit-claim deed from my co-trustee brother doesn't seem like the correct way to do this transaction. My siblings are all happy that I'm purchasing the home, and all are in agreement with the price.

However, my concern is that this is all verbal. What happens if years down the road someone decides to challenge the "refinance"? How can I protect myself from this happening?

My brother suggested we write up a contract, with all of my siblings signing the contract. We would then have it notarized. Will this protect me from someone years from now challenging my ownership?

Hi Katy, Kate here.

If the idea of using a quit claim deed makes you feel queasy, pay attention to your gut reaction. Keep in mind, what lenders require to approve a mortgage should not be construed as proper legal advice.

You have two issues here. Getting mortgage approval and the legalities of protecting your future ownership in the home.

I advise contacting an attorney to see if quit claim deeds and the letter you mention will protect you in a court of law.

Best wishes, Kate

P.S. To avoid an unpleasant surprise, call a title insurance company also. Ask if you should expect a hefty fee from the county where the property is located after recording the transfer of title, especially since your transaction is between siblings, not husband and wife.

Learn more about the importance of title insurance here.

Thanks Kate!
by: Gayle

Your response to my question was just what I needed to inspire me to get a copy of my credit report. I hadn't looked at it for a few years and was shocked to find some major inaccuracies that should be fairly straight forward to dispute.

Bottom line--my husband and I have decided to wait to see if clearing up the mistakes in my credit file will allow us to both go on the loan. Thank you for offering such superb and timely advice.

Hi Gayle, Kate here. I'm so happy to hear this!

You will also find a link to getting the free annual copy of your credit report at How to Contact Three Major Credit Reporting Agencies.

Thank you for the kind words also. I appreciate the feedback.

Best wishes, Kate

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