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Do we need to get married to qualify for a conventional loan???

Posted by TOTALN00B (My Page) on
Wed, Mar 23, 11 at 23:11

After several years of looking, I've finally found a $190K dream house close to the shop I co-own, that I want to jump on before someone else does! Houses in this neighborhood NEVER go up for sale!! I've looked at it several times w/ a contractor and it only needs cosmetic work done. So first I went to a mortgage broker, but I was put off by the $5,000 in fees they tacked on for themselves just for one meeting, plus they thought I should take out an FHA mortgage despite the fact that I'd saved up specifically to put 20% or more down on a house. Which meant my monthly payments would end up being hundreds of dollars more than a conventional loan. So I went to my local credit union, and everything was looking good at first (I have a 734 median credit score, my income is just high enough to qualify on my own, and I have proof of income for the shop I own with the last 2 years' worth of tax returns)...

BUT! Here is what kept me from getting a loan w/ the local credit union: I've only owned the business for 1.5 years. It's a 25-year-old business that my boyfriend and I bought in August 2009 and changed the name of - so I don't have a full 2 years' worth of history owning this business. My partner/boyfriend worked there for 6 years before we bought it. Our income has been steadily going up.

Another problem is that despite my high credit score, the credit union requires me to have 5 different loans or credit cards on my reports, and I only have 3 - a $20,000 personal loan (paid off), a $7,000 personal loan (paid off), and a $13,000 student loan (making all payments on time). I also have a $50,000 business loan which we have paid off halfway, making all payments on time. But that doesn't show up on my personal credit. I do not have any credit card debt, which it seems they really want me to have. Ugh.

So, I tried to apply with my mother as a co-borrower, but her existing mortgage makes her debt to income ratio too high to qualify on her own, and we each have to qualify separately for the full amount (I didn't realize this). This also means I can't apply with my partner, because I own more of the business than he does, and this makes his income too low to qualify separately for the loan.

DOES THIS MEAN WE HAVE TO GET MARRIED??? If we got married, would they count our income and credit history jointly? Does this mean we'd have to file our tax returns jointly next year, though? That would make us owe a lot more in taxes, than filing separately. I'm not sure what to do.

IS THERE ANY "NON-CONFORMING" LOAN I MIGHT QUALIFY FOR? Like a 5/2 or something? I really don't want to get an FHA loan, because the extra insurance tacked on would make the mortgage unaffordable for me, ironically. This is really frustrating, because I am SO CLOSE to qualifying for a conventional loan! Are there any bigger banks that may be more lenient than my local credit union???

If I could just wait until August, this would all be so much easier, but the only house I'm interested in around here is up for sale NOW, and I've just heard a family member of the seller has offered to buy it for a small sum. It's been on the market for 6 months...


Follow-Up Postings:

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RE: Do we need to get married to qualify for a conventional loan?

Something is not quite adding up for me here. You should be able to apply as an unmarried couple and get the same deal as if you were married. Since getting married often means two working people will pay more in taxes than the total of what they would pay with the same incomes if they were single, don't get forced onto getting married in order to buy this house. You should talk to another couple of lenders, and also check out loans online from legitimate lenders. The idea that two people each need to qualify for the whole loan is bogus. If you can't qualify for a loan as two singles, but could get it if you were married, I think that would constitute discrimination. Are you in a small town where things my not be as enlightened as they should be? I've been down this road, so don't get discouraged.


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RE: Do we need to get married to qualify for a conventional loan?

"So first I went to a mortgage broker, but I was put off by the $5,000 in fees they tacked on for themselves just for one meeting,"

I think you misunderstand how the process works and what those fees are. There are going to be closing costs for any loan you get. They are required by law to give you an estimate of those costs. However, if that broker was trying to steer you to a loan you didn't want, then you should just find a new broker who will listen to you.

"I do not have any credit card debt, which it seems they really want me to have."

They don't want you to have debt, they want you to have more credit history.


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RE: Do we need to get married to qualify for a conventional loan?

Keep loan shopping. Try local banks. Compare rates and closing costs as well as asking if you can qualify. You might try contacting Churchill Mortgage. I am not affiliated with them in any way, shape, or form, but Dave Ramsey, the "debt is dumb" king endorses them, and they manually underwrite (which means they don't just go by credit score).


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RE: Do we need to get married to qualify for a conventional loan?

No, you don't have to get married. If you apply for the loan jointly, they will look pool your income and debt to calculate your DTI ratio, so you'll probably be able to get a larger mortgage. They will also use both of your credit scores, however, most banks/CUs use the lowest of the two of you.
You may want to head over to the forums/communities on creditboards.com or myfico.com - there are lots, and I mean lots, of discussions on mortgages, credit and what to do about it over on those sites. (Not that folks here aren't immensely helpful too...)


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RE: Do we need to get married to qualify for a conventional loan?

Thanks, everyone! This is a small town, and the loan officer at the local credit union did seem to think that national banks might be more lenient? Of course, the credit union's fees are much lower than the banks I've tentatively looked at, and I had wanted to work with them because that's who I've gotten loans from in the past, always paid on time. :(

Bill: The loan officer's fees were separate from the closing costs, in addition to them, and labeled as loan officer's fees. All the usual fees were also listed.

The problem with living in a small town is there is not a lot of competition around, so fees are hiked up for EVERYTHING just because they can be. This county, incidentally, frequently has the highest price of gas in the continental U.S. It's just like that for everything - but it is a gorgeous place, very mild climate, surrounded on one side by the Pacific Ocean and pristine forests on the other, so people get really attached to this place despite the hassle.

The credit history thing is really frustrating. I've even paid rent that was higher than the cost of this mortgage at the credit union (if I had qualified by being in business a few months longer). I have a phone appointment w/ Bank of America today - I'll see how that goes...(We don't even have a local loan officer for B of A, apparently)...


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RE: Do we need to get married to qualify for a conventional loan?

"the loan officer at the local credit union did seem to think that national banks might be more lenient?"

Something is very wrong then.

CUs are usually easier than the national lenders.

They are usually willing to do more than just run automated underwriting software.

A history of paying rent above the mortgage should have helped, but it will also depend on what reserves you have.

When the AC fails in my rental properties the tenants call.

I pay to have it repaired, not them.

If you owned the house it would be on your nickle.


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RE: Do we need to get married to qualify for a conventional loan?

Beaware that Bank of America will take months to give you a loan. It is one of the worst. If you are in the No CA area look at Coast Credit Union (I think that is the name) or one of the other local banks. A relative has had good luck with one of the credit unions in Eureka CA, don't know which one. Took less than a month to do a refi.


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RE: Do we need to get married to qualify for a conventional loan?

Do you have a written agreement to cover if one party wants out of the house and the other does not?

Only married couples can use 'tenants by the entirety' (non-dividable ownership by both persons).

Everyone else uses 'in common' or 'right of survivorship.'

Partition lawsuits can be a nasty fight.


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RE: Do we need to get married to qualify for a conventional loan?

Brickeyee, I think that depends on the state, doesn't it?

(But, yes, OP you do need such an agreement....)


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RE: Do we need to get married to qualify for a conventional loan?

You have what's clled a "thin" credit profile. Which means a lender can't really rely on the FICO score since there isn't enough creit history behind it.

Here is an example of the minium required:

Minimum Required Credit Depth (all credit profile requirements must be met)
- The Borrower(s) must have a minimum of 2 credit scores (preferably 3 credit scores).
- Minimum 3 Total Trade Lines:
-- All 3 Trade Lines must be active within the last 12 months
- The credit profile must demonstrate a 24-month credit history.
- Any trade-line, listed as an authorized user account, is not eligible for inclusion.

And you have not been self-employed for 2 full years, which is a basic requirement these days. Lenders want to see 2 years tax returns documenting self-employment income, even on a FHA loan. I assume your boyfriend worked there previously as an employee ... unfortunately that doesn't count towards being self-employed.

I'll be interested to hear what BOA said.

Good luck.


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RE: Do we need to get married to qualify for a conventional loan?

"I think that depends on the state, doesn't it? "

I am unaware of any state that allows 'tenants by the entirety' to anyone except a married couple.

Some state do not allow it for anyone, but the ones that allow it restrict it to married couples.


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RE: Do we need to get married to qualify for a conventional loan?

Sounds like you do not want to get married, as was the reason for the all caps?

if I was in your shoes, I would get the place on my own and not get it with boyfriend.

So, call a few banks and credit unions and a broker or two in the nearest bigger city within 50 -100 miles of the property. You don't want to pay any points or origination fee if at all possible. They both are usually a percent of the loan and add costs that you pay at closing. Just because you are in a small town, doesn't mean you have to use the lender in that town. Heck, I once used a lender in another state before...a credit union with no branches within 800 miles of the house i bought.

If you must have 2 years of owning the business...well, you can try to go under contract now and set closing at 6 - 7 months out when your 2 years of owning business will be met. Maybe you can rent the place for those 6 months while still under contract?

Another option - pass on getting a contract now, then wait 4.5-5 months and see what home inventory is available then. Then schedule closing date 2 months out so you'll have your 2 years of owning the business by closing date.


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RE: Do we need to get married to qualify for a conventional loan?

"I am unaware of any state that allows 'tenants by the entirety' to anyone except a married couple.

Some state do not allow it for anyone, but the ones that allow it restrict it to married couples."

Ah. (I live in one of the 'not for anyone' states, so I was unfamiliar with it altogether.)


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