Life happens, and circumstances change.
So what happens if you get married after obtaining a USDA loan?
In this article, we’ll explore the implications of getting married after securing a loan and what steps you should take to ensure you comply with the requirements for the loan application.
Whether you’re a first-time homebuyer or getting a second home, understanding the implications of marriage on your loan from the Department of Agriculture can help you make informed decisions and achieve your housing and mortgage goals.
Ready? Let’s explore.
What are USDA Loans?
USDA home loans help eligible borrowers purchase homes in rural development and suburban areas. These loans promote homeownership in designated rural areas by offering favorable terms and features to qualified borrowers.
The loan program offers 100% financing, low interest rates, flexible credit requirements, and no mortgage insurance, making them a suitable loan option if you fancy a home in any rural or suburban neighborhood.
Will Getting Married After Obtaining a USDA Loan Affect My Loan Status?
Not necessarily; the answer depends on several factors. Don’t worry; it’s not as complicated as navigating seating arrangements at the reception.
We go over them below:
- Getting married will not affect your loan status if you obtained the USDA home loan as a single borrower. Your loan terms will remain the same, and your spouse will not be held responsible for the debt.
- But if you and your partner jointly apply for a loan and later get married, it may impact your loan status since the loan is based on both your credit ratings and income limit. After marriage, your joint financial situation may change, including your combined income, debts, and credit history, which could affect your loan status.
Note that the implications above also stand if you applied for a USDA construction loan or any other variation of the USDA loan.
Can I Add My Spouse to the Title of the Property After We Get Married?
Yes, it is possible to add your spouse’s name to the title of a property after marriage.
Doing so will transfer ownership rights between both of you. It is common practice for couples to add their partner’s name onto the title after marriage if one partner had previously purchased the property with a USDA loan.
To add your spouse to a government-backed USDA loan, contact your loan servicer and provide them with all relevant information – such as their credit rating, employment history, and income.
Your loan servicer will then assess whether these factors meet the eligibility requirements for the program; if so, they’ll be added as co-borrower alongside you.
How to Get Out of A USDA Loan
However, if you want to get out of the USDA loan after marriage, there are a few ways to go about it. Let’s explore:
- Refinance: One option is to refinance your USDA loan into a conventional loan. This is a good choice if you have accumulated equity in your home or if interest rates have plummeted since you first took out your USDA loan. You can also utilize a cash-out refinance to pay off the remaining balance on your USDA loan.
- Request a loan assumption: In some cases, you may be able to transfer your USDA loan to another person through a loan assumption. This can be a good choice if you want to transfer your home ownership to a family member or friend.
- Sell your home: Another option is to sell your USDA-financed home and pay off your mortgage. This can be a good choice if you want to downsize, move to a new location, or simply get out of your current mortgage.
Can I Get a USDA Loan Without My Spouse?
Yes, just as you can apply for a USDA loan without your spouse, you can get a USDA loan without your spouse.
However, keep the following in mind:
- Only your income will be considered if you apply for a USDA home loan without your spouse. This means you may qualify for a lower loan amount than you would if your and your spouse’s incomes were considered.
- If you get a USDA loan without your spouse, you will be solely responsible for repaying the loan. This includes making all payments on time and keeping up with any other obligations under the loan.
- If you’re married and living in a community property state, your spouse’s debts and income may still be considered when determining your eligibility for the loan.
To summarise, here are the possible scenarios you may apply for and get approved for a USDA loan with or without your spouse:
| Scenario | Eligibility for USDA Loan |
|---|---|
| Applying as a Single Borrower | Yes |
| Applying with a Co-Borrower (not spouse) | Yes |
| Applying as Married, but Excluding Spouse | Yes |
| Applying with Spouse (Joint Application) | Yes |
| Applying with Spouse (Spouse as Borrower) | Yes |
| Applying with Spouse (Spouse as Co-Borrower) | Yes |
| Applying with Spouse (Spouse as Guarantor) | No |
| Applying with Spouse (Spouse as Co-Signer) | No |
Will My Spouse’s Income Be Taken Into Consideration When Determining My USDA Loan Eligibility After Marriage?
Your spouse’s income will be considered when applying for a USDA loan after marriage. Lenders use both of your combined earnings to determine if you meet the income eligibility requirements for the loan; as USDA loans are intended for low to moderate-income households, combined earnings must equal no more than 50% of your household’s gross monthly income. Learn more about how the USDA loan program works to make a more informed decision.
Frequently Asked Questions
Can I refinance my USDA loan after getting married?
A refinance of your USDA loans can be done after marriage. You can get lower interest rates or modify the terms to suit your financial situation. Do your research on the costs and terms.
Can my spouse be added to my USDA loan after we get married?
Yes. After you get married, you may add your spouse to your USDA loan.
What happens if my spouse has a bad credit score and I have already obtained a USDA loan?
If your spouse has a bad credit score and you have already obtained a USDA loan, it should not impact your existing USDA loan as long as you are the sole borrower of the loan. However, if you intend to apply for a new loan or refinance and include your spouse as a co-borrower, their credit score and financial situation will be considered. If they have bad credit, we recommend improving their credit score before applying for a new loan or refinancing.
What if I divorce my spouse after obtaining a USDA loan?
If you got a USDA loan with your spouse and then divorced, there are a few things to consider:
- Impact on credit rating: Incomplete payments or failure to make a down payment to a loan can hurt your credit rating.
- Loan responsibility: When the loan is taken out jointly, you and your spouse must agree on dividing this obligation. This includes whether or not you sell the property.
- Property ownership: There should be an agreement on how ownership is divided.
What if I want to buy a new house with my spouse after obtaining a USDA loan?
If you’ve got a USDA loan and you and your spouse are now interested in buying a new house together, you have a few options to consider:
- You can apply jointly for a USDA Loan for new Property.
- You could rent your current home and use the income for mortgage payments to purchase a new house.
- You and your spouse could sell your house to raise funds for a brand-new home.
To Wrap Up
A marriage following a USDA loan will not affect your loan status.
But be sure to understand the requirements surrounding your USDA loan to be sure what to do in any situation not to breach any requirements.
If you married your partner after getting a USDA loan and are still trying to figure out what to do, call us, and we’ll advise you on how to proceed.
And congratulations on your newlywed status! Here’s to a lifetime of blissfully wedded bliss!
