Should Both Our Names Be on the Mortgage Application?
Deciding whether one or both partners should be on the mortgage application is the first major financial decision you'll make together. There isn't a single right answer; it depends entirely on your combined financial picture.
Applying Together: The primary benefit is increased purchasing power. Lenders will consider both incomes, which can help you qualify for a larger loan. For example, if you're looking at a competitive market like Austin, combining a $90,000 salary with a $70,000 salary gives you a qualifying income of $160,000. This significantly expands your housing options. The downside is that both of your credit histories and debts are scrutinized. Both partners become legally responsible for the entire loan amount, a concept known as joint and several liability. If one partner fails to pay, the other is 100% responsible for the debt.
Applying Solo: If one partner has a significantly higher income and a much better credit score, applying alone might secure a better interest rate. The partner on the loan is solely responsible for the debt. However, the non-borrowing partner can still be on the title to the home, granting them ownership rights. This structure requires a robust legal agreement to protect the non-borrowing partner's financial contributions.
Titling Your Texas Home: Joint Tenants vs. Tenants in Common
How you take title to the property is legally distinct from who is on the mortgage. This decision has major implications for inheritance and ownership rights. In Texas, unmarried couples have two primary options.
Joint Tenancy with Right of Survivorship (JTWROS)
This is the most common choice for couples who want to function like a married unit.
- Ownership: Both partners own an equal 50/50 share of the property, regardless of who contributed what to the down payment.
- Survivorship: This is the key feature. If one partner passes away, their 50% share automatically and immediately transfers to the surviving partner. The property avoids the lengthy and often costly probate court process.
- Example: A couple buys a home in Houston as joint tenants. If one partner dies unexpectedly, the other becomes the sole owner of the property, even if the deceased partner's will stated their share should go to a family member.
Tenants in Common (TIC)
This option offers more flexibility and is ideal for couples with unequal financial contributions or those who want to keep their assets separate.
- Ownership: Partners can own unequal shares. This is perfect for reflecting different down payment amounts. You could own the property 70/30, 60/40, or any other split you agree upon. Your ownership percentage should be clearly stated on the deed.
- Survivorship: There is no automatic right of survivorship. When a partner dies, their share of the property passes to the heirs named in their will, not to the surviving partner.
- Example: A couple is buying a townhome in San Antonio. Partner A contributes $80,000 to the down payment, and Partner B contributes $20,000. They decide to title the home as Tenants in Common, with Partner A holding an 80% ownership stake and Partner B holding 20%. If Partner B passes away, their 20% share goes to their designated heir, not to Partner A.
How Do We Protect Our Individual Down Payment Contributions?
Protecting your initial investment is one of the most important steps, especially if contributions are unequal. A Tenants in Common agreement is a great start, but a cohabitation agreement (also known as a property agreement) provides the most comprehensive protection.
This legal document, drafted by an attorney, acts as a financial blueprint for your shared property. It can explicitly state:
- Initial Contributions: Document the exact amount each partner contributed to the down payment and closing costs.
- Reimbursement Clause: Specify that upon selling the house, each partner is reimbursed their full initial contribution before any remaining profit (equity) is divided.
- Equity Split: Define how any profit from the sale will be split. It could be 50/50 or proportional to your ownership stake (e.g., 70/30).
Planning for the Unexpected: What Happens If We Break Up?
A breakup is emotionally difficult, and arguing over a shared house makes it worse. A cohabitation agreement removes the guesswork and provides a clear exit strategy.
Your agreement should outline the process:
- Buyout Option: One partner may have the option to buy out the other. The agreement should define how the buyout price is determined. A common method is to get two independent appraisals and use the average value. It should also set a timeline, for instance, the partner has 60 days to secure financing for the buyout.
- Forced Sale: If a buyout isn't feasible, the agreement should state that the property will be listed for sale within a specific timeframe (e.g., 30 days). It should also detail how you'll agree on a listing agent and price.
- Proceeds Distribution: The agreement reiterates how the money from the sale will be distributed: first to pay off the mortgage and any liens, second to reimburse down payments (if stipulated), and third to split the remaining equity as agreed.
Creating a Cohabitation Agreement: Your Property Blueprint
While it might feel unromantic, creating a cohabitation agreement is a smart business decision. This document is a private contract between the two of you and is separate from your mortgage and title. It's about clarity and protection, not a lack of trust.
To be legally sound, this agreement should be drafted by a qualified Texas real estate attorney. It should clearly define:
- How mortgage payments, taxes, insurance, and maintenance costs will be divided.
- Ownership percentages (reflecting what's on the title).
- The precise procedure for selling the home or one partner buying out the other if the relationship ends.
How Applying Together Impacts Individual Credit Scores
When you apply for a mortgage together, lenders pull credit reports for both of you. The score they use to qualify you for the loan is typically the lower of the two applicants' middle scores. (The data, information, or policy mentioned here may vary over time.)
For instance, if your three FICO scores are 780, 785, and 790 (middle score: 785) and your partner's are 680, 690, and 700 (middle score: 690), the lender will base your interest rate and loan terms on the 690 score.
The initial application results in a hard inquiry on both of your credit reports, which can cause a small, temporary dip. Over the long term, making consistent, on-time payments will build a positive payment history for both of you. Conversely, any late payments will negatively impact both of your credit scores.
What If One Partner Has Much Better Credit?
This is a common scenario. Let's say Partner A has an 810 credit score, while Partner B has a 650 score. You have two main options:
- Apply Together: You'll be qualified based on the 650 score. This means you will likely pay a higher interest rate over the life of the loan, costing you thousands more. However, you can use both incomes to qualify for a larger home.
- Apply Solo (Better Credit Partner Only): Partner A applies for the mortgage alone. They will secure a much better interest rate based on their 810 score. The major limitation is that they can only use their own income and debt-to-income ratio to qualify, which might limit the home price you can afford. Partner B can still be added to the title as a co-owner, but they have no legal obligation for the mortgage debt. This setup makes a cohabitation agreement absolutely essential to protect Partner B's financial stake.
Does Texas Common Law Marriage Affect Our Home Purchase?
Texas is one of the few states that recognizes common law marriage. However, simply living together and buying a house does not automatically make you common law spouses. To be considered married under common law in Texas, a couple must meet all three of these conditions:
- They agree that they are married.
- They live together in Texas as a married couple.
- They 'hold themselves out' to the public as being married (e.g., introducing each other as 'my husband' or 'my wife', filing joint tax returns).
If you meet these criteria, any property acquired could be considered community property, which is subject to a 50/50 split in a divorce. If you do not intend to be in a common law marriage, you should be careful not to represent yourselves as married. Consulting with an attorney is the best way to understand your status and protect your assets.
Navigating a joint home purchase in Texas requires careful planning. If you're ready to explore mortgage options that protect both partners, our strategists can help build a loan that fits your unique situation. Apply now to find the right path forward together.
Author Bio
David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.
