If a couple buys a home, whose name would show up on title deed and whose will go on mortgage deed. The answer, for many homebuyers, is that both names will go on both papers.
But there always are exceptions and often with a good reason. Let us tell you about a few basic things you must know about this diverse topic before you make any big decision. Title and Mortgage is one of the hottest BPO services out there, and we will discuss it in detail in this post.
Title/Mortgage where is the difference.
In the very beginning, we must clarify that Title and Mortgage are not similar things. The legal term “title” points out the rights of ownership. It grants a person or persons exclusive use, possession, and transfer of ownership rights for a given real estate property.
Whereas, a mortgage, or in some states a “deed of trust,” pledges the real property to secure a loan.
Not more than half of the buyers will use a home loan to purchase their home. That means they will have both a title and a mortgage. Consequently, there needs to be a decision made about whose name goes on the title and the mortgage, for these people. The answer for each may vary, as both documents are not the same.
Why Joint Application?
Many Mortgage lenders apply minimum FICO rule. This particular rule implies that the credit score used to judge the mortgage application is the middle-lower score of the two applicants. In case, one spouse has bad credit, it could affect the interest rate they qualify for and lead to higher costs.
Another common reason for couples opting joint mortgage application is short or unusual work history. Requirements of many lenders are what we say “2/2/2” documentation requirements. It comprises of two years of W2 income statements, two years of tax returns, and two months of bank statements. If one spouse has a shorter history or is unable to provide such documentation, other spouses might get approved singly.
Money is Better Saved by Applying for Loan Alone
Recently, the Washington Post reported on a 12-year study by the Federal Reserve. The study revealed that many couples were leaving money on the table by applying jointly when one spouse could have qualified for the mortgage alone. The results were stirring.
There were more than 600,000 conventional loans issued between 2003 and 2015 and 10 percent of them could have qualified for a lower interest rate by having the better-qualified buyer apply alone.
The report noted like this, “Nearly 10 percent of prime borrowers who applied for their loans jointly could have lowered their mortgage interest rate at least one-eighth of one percentage point if the mortgage was applied for by the applicant with a higher credit score and an income high enough to qualify for the mortgage.” Fed economists said that a further 25 percent of borrowers could have “significantly reduced” the cost of their loan by having the more qualified borrower apply singly.
How Both Names can appear on Title and not Mortgage
The same Washington Post article also exposed the fact that many couples applying for a home loan have strong feelings about applying jointly for their mortgage. “They are buying the house together and there’s a feeling of joint ownership that’s important to them, even though both could be on the legal title to the house without both being on the mortgage,” said the news outlet.
Many people might not know that this arrangement is available to both married and unmarried couples. How can this be true? A mortgage deed involves an agreement to pay back the loan amount borrowed to purchase the home, whereas title, is a separate matter of ownership entirely.
Issues Raised By the Assignment
All these complexities of real estate laws sometimes give birth to very complicated issues. Top of the list is Divorce.
It is a common issue for homes with a joint mortgage or title. If a home is paid for, attorneys will generally try to divide the assets. Often this is accomplished through a quitclaim deed, where one party hands over their ownership rights over to their former spouse. If there is a mortgage loan on the property, attorneys then search the options of dividing liabilities. The spouse who remains in the house will often refinance the loan individually before the other spouse cedes ownership through a quitclaim.
Next comes death. What if one spouse passes away? In many cases, it depends on location. The laws governing property transfer upon death and inheritance are largely decided at the state level. Not all states agree on the best way to go about this.
Nearly half of U.S. states permit Transfer-on-Death deeds, which are also called beneficiary deeds. They allow real estate ownership to be transferred upon a person’s death without a living trust or probate court proceedings. In other states, interstate succession laws may apply.
For homes with mortgages where the sole mortgage holder is no more, the mortgage generally must continue to be paid to avoid foreclosure. This situation is complex, and mortgage insurance coverage, life insurance benefits, the assumption of the mortgage, or refinancing of the loan might come into play in the solution.
Other unique circumstances arise in some states. In Texas, one law firm points out the various factors to consider before adding a new party to a deed. In Alabama, the Homestead Law adds complexity to some real estate transactions to ensure a spouse does not sell or refinance the family home without the consent of the other cohabitating spouse.
In the end, homebuyers should be aware of tax issues related to whose name is on the mortgage and title. Normally, the party who pays the mortgage can take advantage of the Home Mortgage Interest deduction, even if they are not named on the mortgage, as long as they are named in the title. Moreover, a recent appellate court decision will reportedly let some coupled, though unmarried homeowners with jumbo mortgages take advantage of even bigger deductions.
When You Should Ask Professional?
If you are in the market for a new home, you may be fighting with your decision about whose name should go on what document. Even if you already own your home, you may still have questions about your title or mortgage. So getting advice from a professional real estate attorney with experience handling these matters in your area is crucial.
Location is the name of the game in real estate. What is true for one owner might turn out to be totally false for another. Similarly, it is necessary to check with a certified tax professional before you claim any tax benefit. These professionals are there to handle such complex questions and can help tailor a solution that fits your unique situation. Transdata is the pioneer in title processing services and takes care of intensive functions in a safe manner.
In fact, they offer a wide variety of BPO services. They provide Management, Process Consulting, and BPO services to the Mortgage and Title industry. If Order Entry, Indexing, Commitment typing, and document follow-up is getting on your nerves and you do not have adequate resources and sufficient time, contact us today.