Do You Get Better Mortgage Rates If You Are Married?

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    When considering applying for a home loan, one important factor that often comes up is marital status and whether being married can help you qualify for better mortgage rates. As with many things related to personal finance, the full picture is more nuanced than a simple yes or no answer.

    In this blog post, I will cover how marital status can potentially impact mortgage rates and under what specific circumstances being married may provide certain advantages or disadvantages during the home financing process.

    Let’s dive in.

    Marital Status as a Risk Factor

    At their core, mortgage lenders are in the business of assessing and mitigating risk. When reviewing a home loan application, one of the primary ways they do this is by looking at the borrower’s financial stability, credit history, debt-to-income ratios, and ability to make timely payments over the full term of the loan.

    Marital status itself does not directly determine approval or interest rates. However, it can offer clues to a lender about the relative risks involved.

    In general, being married is viewed more favorably by lenders than applying as an individual for a few key reasons:

    Income & Assets:

    For most couple households, total household income and combined savings/assets are significantly higher when accounted for jointly rather than individually. This greater financial footing reduces the inherent risks should one spouse lose their job or have some other unforeseen financial setback.

    Credit History:

    When spouses apply together, the lender can consider both credit reports rather than just one. This increases the chances of a stronger average credit score between the two applicants. It also indicates a longer and more proven shared financial history together versus someone who has only managed credit responsibilities individually.

    Stability:

    Statistical data shows that married homeowner households tend to own their homes longer before moving compared to single buyers. This longevity suggests less likelihood of defaults if economic circumstances take a downturn. It signals the owners’ commitment to remaining in the area and making payments for the foreseeable future.

    So in essence, while marriage itself does not equate to automatic approval or certain rates, lenders perceive couples who apply jointly as representing lower risk compared to individuals in many common situations.

    This risk assessment can potentially translate to slightly more favorable terms, including potentially lower interest rates, for married applicants everything else being equal.

    However, it’s also important to note there are some exceptions where being single may carry equal or fewer risks depending on individual circumstances, which will be explored later in this article.

    The impact of marital status truly needs to be assessed on a case-by-case basis along with all other relevant underwriting factors.

    Income Combination Advantages

    For most married or cohabitating couples, one of the clearest potential advantages to applying for a home loan jointly rather than separately is the ability to combine both spouses’ incomes when qualifying.

    Mortgage lenders have predefined debt-to-income (DTI) thresholds they use to determine how much monthly housing debt a borrower can reasonably afford based on their wages and existing obligations.

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    When filing taxes as Married Filing Jointly, both partners’ W-2 forms are added together to represent the household’s total earnings. Lenders will likewise consider this combined salary figure, rather than just one person’s pay alone, when running the DTI ratio calculations.

    This income combination frequently allows couples to qualify for much larger loan amounts than if they had applied as individuals. Some real world examples help illustrate the substantial benefits:

    Scenario 1: John earns $5,000 per month and has a DTI limit of 40%. Alone he could only afford a $167,000 loan.

    Scenario 2: John and his wife Jane both earn $3,000 per month each. Together their DTI limit is still 40% but now on a $6,000 combined monthly income. This lets them qualify for a $300,000 loan.

    As this simple hypothetical shows, joining financial forces through marriage can nearly double someone’s home buying power solely due to counting both partners’ wages towards loan affordability.

    For many buyers, being able to borrow higher amounts in turn makes it feasible to consider larger, more expensive properties they may not have otherwise qualified for individually.

    There are some caveats that still require individual creditworthiness. But when married applicants clear that hurdle, their collective earnings give them a strong edge in the underwriting process over applying as a single person.

    This ability to blend incomes is one of the primary ways being married can correlate to potential access to more favorable rates or terms.

    Asset Combination Perks

    Just as combining incomes widens the door for larger loans through increased affordability measures, marrying or joining finances with a partner also takes advantage of being able to pool joint savings, investments, and other assets.

    These collective holdings can then be factored into a home loan application’s overall financial picture presented to the lender.

    Having more robust reserves and available funds to draw from reduces perceived risk in a few key ways:

    Lenders feel more secure in approving higher loan amounts knowing the borrowers have ample cash reserves to tap if temporarily short on income or unexpected expenses arise.

    Combined assets boost overall creditworthiness by demonstrating the ability to manage money responsibly over a longer history and in higher dollar amounts than individually.

    Down payment dollars, closing costs, and post-purchase funds are more solidly covered without depleting both applicants’ separate accounts and leaving little cushion.

    To illustrate the impact of sharing assets:

    Jane has $30,000 in savings that qualifies as a down payment on a $150,000 home if applying alone.

    But if married to John who also has $30,000 set aside, together their down payment grows to match a much larger $300,000 loan thanks to their combined $60,000 assets.

    So while each spouse’s credit and income still carries weight on its own, marriage enables pooling monetary resources that magnifies buying power and financial stability in the eyes of underwriters. Leveraging a partner’s funds provides an significant means of strengthening any mortgage application.

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    Handling Adverse Credit As A Team

    For some borrowers, being married can also be advantageous if one spouse happens to have less than stellar credit. When using both credit reports jointly, the applicants have the chance to offset minor blemishes on one file through theother’s positive history and scores. More specifically:

    An individual with average credit may get higher rates, but their partner’s excellent report can balance things out to an overall better combined rating.

    Isolated instances of past credit mistakes like a single late payment won’t overshadow an otherwise clean joint record between both applicants.

    Bankruptcies, collections and other serious delinquencies have much less impact on combined approval odds if the other spouse demonstrates solid financial management long-term.

    Essentially, marrying allows credit weaknesses to be addressed together as a team effort rather than being singled out and penalized alone.

    When one person falters, their partner can help compensate and still get the merger assessed fairly on its collective merits. Plus, continuing shared finances afterward sets both parties up for ongoing credit building as a unit over time.

    In solo applications though, a blemish stays concentrated solely on the individual, putting them at greater risk for higher interest costs or loan denial. But as a married pair, there’s room for balancing each other’s strengths and weaknesses monetarily.

    Exceptions Where Singles May Fare Equally or Better

    While the standard assumptions tend to give married home buyers certain advantages, it’s also true there are some scenarios in which being single may place a borrower on relatively equal or stronger financial footing compared to a coupled applicant. Here are some key exceptions to consider:

    High Earners: For individuals with exceptionally high salaries, maxed-out benefit caps start negating the income-combining perks of marriage. A single applicant making $250K annually may get the same rates as a couple with $500K combined earnings.

    Short Work Histories: One spouse being newly employed or having an unproven career can offset the reliability of the other’s stable job. A single borrower with a long record may prove steadier.

    Different Priorities: Conflicting financial goals like one partner wanting to spend versus save can introduce complications. Solo applicants have full control over finances and obligations.

    Credit Disparities: A single borrower with near-perfect credit stands to gain nothing from tying to a partner with derogatory marks or less prowess managing accounts.

    Non-Traditional Households: For couples living together without legal marriage, commitments are less binding on paper regardless of joint assets/liabilities in practice. Singles avoid any issues here.

    Short-Term Ownership: Bachelors intending to sell within a few years may receive similar interest rates as they represent little short-term risk to the lender compared to families seeking long-term roots.

    So while marriage opens many doors for some buyers, unique high-achieving individuals or those with specific independent situations may find their solvency judged equally or better alone on their own established credentials. It comes down to evaluating each personal financial picture independently.

    Other Factors That Impact Rates Beyond Marital Status

    With all that said, it’s critical to remember marital status itself is not the sole or even primary consideration lenders make when establishing mortgage interest rates. Dozens of other complicated variables carry much heavier weight

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    Other Factors That Impact Rates Beyond Marital Status

    With all that said, it’s critical to remember marital status itself is not the sole or even primary consideration lenders make when establishing mortgage interest rates. Dozens of other complicated variables carry much heavier weight. Factors like:

    • Credit Score
    • Debt-to-Income Ratio
    • Loan-to-Value Ratio
    • Employment History
    • Loan Type (conventional, FHA, VA, etc.)
    • Property Type (single-family home, condo, etc.)

    Additionally, the current state of the overall economy and housing market along with any special incentive programs being offered at a given time can all sway rate sheets up or down independently of a borrower’s coupled or single classification.

    Perhaps most significantly, the lender itself, their internal pricing metrics, and the relative demand in their pipeline of applications have enormous influence over the actual rates presented to borrowers – often surpassing any potential edge from marital benefits.

    Two otherwise similar applicants could see rate quotes that vary by a quarter point just due to going with different loan officers and underwriters even at the same company.

    So while marriage may open the door for some rating-affecting perks like income/asset blending, stronger credit profiles as a pair, and a view of households versus individuals

    – for most people working with one preferred lender, these edges would amount to a very modest improvement, if any improvement at all, to their final offered rate. Marital status addresses risk in a broader sense, but does little to nothing to override or counterbalance more numerically-driven factors.

    Conclusion

    In summary, while being married can present some clear advantages for home buyers in terms of combining finances, offsetting credit issues as a team, and allowing lenders to consider both applicants’ profiles collectively

    – these benefits do not equate to a guarantee of certain rates or approval. Marital status itself holds relatively minor bearing on mortgage interest compared to credit metrics, ratios, the property, one’s individual profile, and economic conditions.

    For many home purchasers, especially those with very strong credentials or unique independent situations already, the differences in rates or terms attributable solely to relationship status are likely to be negligible if present at all.

    The most important things are each individual’s credit history, income/employment, assets/reserves, and overall debt load.

    So in the end, there is no simple yes or no answer as to whether being married secures objectively better mortgage rates in every case.

    It depends greatly on other personal factors, the strength of each applicant if applying separately or together, and variables entirely outside a borrower’s control like the current lending environment.

    The best approach is focusing first on optimizing one’s own financial qualifications, then allowing the lender to review the full application merits holistically.

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