Being in a relationship is often blissful until the topic of finances arises. One partner may not be as skilled at managing money or may have fallen into a financially stressful situation due to business ownership or redundancy. If one person is in debt but the couple wants to purchase a home, the pair may wonder if this is a possibility. The answer is yes, whether or not the person with financial problems is participating in a debt management plan or another program.
If your partner has poor credit you could qualify for a mortgage without them if you have a deposit and pass the affordability checks and underwriting criteria. You may also wish to refer your partner to us to review a debt management plan.
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The person with a more favourable credit rating should apply for the mortgage solely in his or her name
Prospective lenders will review the financial background and credit status of this individual alone. The individual should be aware that he or she will be held solely responsible should the mortgage fall into arrears. Based on how the mortgage and deed are worded, only one person may have legal ownership of the property.
The fact that only one person in the partnership is applying for the mortgage has another benefit. Experts say that comingling finances is the worse thing unmarried partners can do. They advise these couples not to take out bank accounts or loans jointly. Though joint status may seem like a sign of commitment, it can result in huge financial headaches if the couple splits. With no legal guidelines defining their relationship, division of assets and debt can be a long and painful process.
Being approved for a mortgage is difficult enough for most married couples so it can be a true struggle for one person
Credit history and rating should be excellent, income should be sufficient to support the loan amount requested, and the individual should have an adequate deposit. Credit should not be used excessively in the months leading up to applying for the mortgage because the lender may view this as the beginning of a negative trend.
The individual applying for the mortgage should carefully consider whether mortgage payments and living expenses will be affordable if the relationships ends. The price range of affordable homes should not be based on financial contributions from the other partner. Instead, the individual applying for the mortgage should find a home that he or she could afford individually. That way, if the couple splits, the mortgage holder can continue making the mortgage payment to remain in the home.
Though it has been several years since the financial crisis, lenders are still very cautious
Therefore, they take great steps to prevent granting an unaffordable mortgage. Applicants may feel like they are being restricted, especially when a single person is applying for the mortgage. However, this is for the best because it helps ensure that a breakup will not result in foreclosure.
The partner who plans to apply for the mortgage should review his or her credit report and correct any errors prior to completing a mortgage application. Comparison-shopping for a mortgage loan is recommended because different terms, conditions, and interest rates are available. The individual with financial difficulties should remain focused on debt repayment.