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The Unknown Rule of Joint Mortgages


April 7, 2016

Will you and your spouse or partner be applying for a mortgage together? You may be leaving money on the table due to high-interest rates caused by a lending practice that’s not fully understood, at least according to the Federal Reserve.

The problem arises when there is a significantly disparate difference in credit scores among a couple. If one happens to have a much lower FICO score than the other, lenders are typically required to base the mortgage loan application on the lower credit score, even if the other person may have a sterling score of 700+. As a result, if you have say a 780 score and the other person has a score of 630, the interest rate will be based on the latter instead of the former. Unfortunately this a rule followed by many mortgage lenders like Fannie Mae and Freddie Mac that first-time mortgage applicants are unaware of.

Because of this pricing that’s based on risk, may borrowers that are jointly applying have to pay more than they should. In fact, if we take a look at the period between 2003 through 2015 close to ten percent of joint borrowers could have had their interest rates reduced by a minimum of one-eighth of one percentage point if the one with the better score and income applied.

Have you ever run into such a situation when jointly applying for a mortgage with your spouse or partner?
This update is presented by Miami Beach Realtor Tim Allen of Blackstone International Realty, specializing in Continuum South Beach. If you are interested in Miami Beach condos such as the Continuum condos for sale, call Continuum expert Tim at 305-588-2451 for information on sales and rentals.