Buying a Home Using Your S.O.’s Income

Recently I helped a couple buy a home in King County. They’re engaged, had been living together for many years and were ready to purchase their first home. One of them, Billy Bellevue, had some credit issues and it made more sense for them to only have Susie Seattle’s on the transaction.

Because Billy had been giving Sally money for rent over the last year and we were able to document it, we were able to use Billy’s past rent for income to qualify for a larger mortgage amount even though Billy is not on the loan application or mortgage.

This is a unique feature offered with Fannie Mae’s HomeReady mortgage program. Documentation for paying rent to a roommate may include cancelled checks written to the the roommate or bank statements showing monthly transfers to the roommate. Had Billy and Susie each paid their former landlord individually, we may not have been able to use Billy’s income to qualify for more home. Because Billy provided Sally the funds each month for rent, we were able to take advantage of this.

Susie and Billie found a home that qualified for the Fannie Mae HomeReady program without income restrictions. Fannie Mae HomeReady Mortgage is a conventional program that allows for a reduced down payment, reduced private mortgage insurance and often has better pricing on mortgage interest rates. Borrowers are required to take an online home buyer’s class. Many homes have income restrictions and, like Susie and Billie’s new home, there are some areas without income limitations.  By the way, HomeReady is also available for refinances.

This is one example of why if you are considering buying a home, you cannot start too early. It worked out well for Susie and Billy since their arrangement with rent fit with the underwriting guidelines. However, if they were a year or two away from buying a home, a Mortgage Professional could suggest that one of them pay rent to the other roommate and that they properly document it. Of course this is assuming they both cannot be on the mortgage for what ever reason. Meeting with a mortgage professional a year or two in advance of buying a home also allows the Loan Officer to provide advice on improving credit or working towards building savings. 

If you are considering buying or refinancing a home anywhere in Washington state, I am happy to help you! I have been helping people with their mortgage needs since 2000 at Mortgage Master Service Corporation. Click here for a no hassle mortgage quote or here to contact me.