Studies consistently show that money is one of the most significant stressors in any relationship. When couples fight about money, about 14% of them say they’re arguing about important investment decisions. You know, like buying a home and applying for a mortgage loan.
Depending on your financial situation, applying for a mortgage loan jointly might result in a much better deal. However, that’s not always the case, and learning how to plan for this process can help tremendously.
1. Talk About Finances
This goes without saying, but if you plan on applying for a joint mortgage loan with a partner, you better be ready to sit down and really hash out some specifics in terms of finances and financial habits. If you’re thinking about a joint mortgage, then it’s likely that the relationship isn’t that new, so this shouldn’t be too uncomfortable.
Some things to address would be the type of home you are both looking for, the amount each of you feels comfortable spending, how you plan to save for the down payment, and any financial changes that need to occur to meet those goals. Be honest about your career plans for the future; if you’re thinking of going back to school in two years, it might not be the best time to apply for a joint mortgage loan.
2. Figure Out Which Type of Mortgage You Want
There are various types of mortgage loans, and figuring out which one works best for you and your partner is the first step towards purchasing your dream home. For lower monthly payments, you’ll likely want to opt for a loan with a longer life, such as a 30-year fixed-rate loan. This means that you’ll pay the loan back over 30 years, and it will accrue interest at a set rate.
If you and your partner don’t plan on having the home for long, an adjustable-rate mortgage loan might be a better option. As the name suggests, this type of loan comes with an interest rate fixed for a set time, and then the interest rate changes after the introductory period expires.
3. Reduce Expenses & Save
If you’re able to figure out which type of loan you will apply for (and which you’ll actually qualify for), it’s time to begin thinking about what kind of house you could purchase with that loan amount. If you’re taking out a 15-year fixed-rate loan, calculate what that means in terms of monthly payments and down payment.
Then, download a budgeting tool that will help you each assess where you’re currently at financially and what you can do to help save for the down payment (or even increase the down payment amount).
4. Compare Lenders
One of the biggest mistakes that young, first-time buyers make is not comparing lenders. We recommend checking out loans on a marketplace and speaking with at least three different lenders. Take your time to shop around and compare rates, ensuring that you’re getting the best price possible.
If you find that you’re having trouble meeting the requirements to apply for the joint loan that you need or want, take a look at why you’re being denied and what you can do to change that. If all else fails, take another six months or so to improve your credit score quickly, reduce existing debt, or save for a bigger down payment.
5. Continue to Monitor Each Other’s Credit Scores
As soon as you begin to talk about finances with a partner, you should begin to monitor each other’s credit scores, or at least include that in your initial discussion. Seeing as your credit score is such a crucial component of a mortgage loan approval, it’s a huge factor to consider when applying for a joint mortgage.
Depending on the lender, they might let you combine average credit scores. If one partner doesn’t have excellent credit, however, it might be worth applying solo. Regardless, you’ll want to learn how to monitor changes in your score and your partner’s score. That’s what Float is for.
We allow partners to safely and easily share their credit scores with each other at varying levels. At the beginning of the relationship, you’re able to share just an emoji indicator of your credit range, then you can continue to give them access to more information as the relationship progresses. When you’re ready to apply for a mortgage loan, you’ll both have a great idea of where you’re at and, hopefully, will have had time to improve your score.
Interested to see how it works? Download Float today.