5 Mortgage And Homebuying Tips For Newlyweds
For many newlyweds, buying a home makes their union feel even more official. After all, finding the perfect space to grow old together may seem like the most romantic thing a new couple can do.
Yet much like wedding planning, the homebuying process can sometimes test even the most solid couples. Indeed, when you combine the pressure of a new lifetime commitment with first-time homebuying jitters in a hot real estate market, you have a recipe for a potential housezilla meltdown.
But we’re here to tell you saying “I do” to a home can be as smooth as your first dance, if you know the right moves to make.
We tapped a team of experts for intelligence on what newlyweds need to know about making a financially sound mortgage commitment and choosing the right home for their happily ever after.
Tip No. 1: Check out your credit
Some first-time homebuyers don’t have much of a credit track record. Lack of a solid credit history can make lenders question whether you’ll be able to make your monthly mortgage payments. (Lenders consider a credit score of 740 ideal, while a score of 620 is the baseline for securing a decent loan with a reasonable interest rate.)
“Before you even apply for a loan, you need to check your credit report and score—and see where you stand,” says Michael Simons, a real estate broker and the owner of Tres Amigos Realty Group. “You also need to look at your debt-to-income ratio. Finally, sit down with your spouse and discuss your finances to see if one of you has bad credit or a lot of debt, as these factors could cause your loan to be turned down.”
Tip No. 2: You don’t have to put both names on the mortgage
If your credit is good, but your partner’s score is in the red, you have options.
“It’s possible to name the mortgage loan after just one spouse,” says Collen Clark, a lawyer and the founder of Schmidt & Clark, LLP in Dallas. “And that’s highly recommended if one partner’s credit score is low, because it excludes one party’s debilitating credit ratings from being considered during the mortgage calculations, ensuring a more affordable and friendly payment scheme.”
However, keep in mind that ownership is determined by whose name is on the title deed. So make sure both spouses’ names appear on the title, if only one name appears on the mortgage.
“At the end of the day, married couples must learn to disassociate the property’s ownership from the mortgage,” adds Clark. “Being the sole borrower of a mortgage loan does not equate to ownership.”
Tip No. 3: Determine how much house you need
While it might seem impossible to map out the next 30 years of your married life before buying a house, it’s a good idea to talk about the future in broad strokes.
“When buying a new home, there are a few basic things to consider,” says Rachel DiSalvo, broker associate at Keller Williams Park Views in Rutherford, NJ. “Most importantly, determine if this will be your primary residence. Then, determine if it will be a starter home or a forever home.”
Couples should also think about whether they picture children in their future or whether they foresee moving an elderly relative into their home at some point.
Once you determine the size of the home you’ll need, and drill down on a price range, you can work on your financing choices.
“A great mortgage product for a newly married couple that has never purchased a home in the past is an FHA mortgage, which is federally backed and requires just 3.5% down,” adds DiSalvo. “That could come in handy after paying for a wedding!”
Newlyweds should also keep a realistic budget in mind, beyond the home price. Remember that a home purchase comes with property taxes, homeowner insurance, and the home’s upkeep.
Tip No. 4: Beware of too low-interest rates
Did you get a fantastic offer from a lender? It could be a red flag.
“Newlyweds should be on the lookout for unbelievably low interest rates,” says Scott Rubzin, founder of Tiffany Property Investments LLC in Charlotte, NC.
Low interest rates might make an offer seem like a great deal, but there are sketchy loans out there. For instance, if you miss a payment, the late fees can be severe, and the deadlines for payments can tighten. These loans aren’t upfront about how tough the penalties are, so couples can end up losing their homes after a few missed payments.
Tip No. 5: Consider a house hack
Do you have the money to offer a sizable down payment?
“House hacking has become popular among first-time house buyers on a budget,” says Kris Lippi, a licensed real estate broker in Hartford, CT. “Instead of getting a single-family home right off the bat, why not get a duplex first, so you can rent out the other half and lessen the load of the mortgage payment? You can also portion off a section of a family home and rent out extra space there, too.”