Quit claim deed isn’t enough on its own

Question: I am in the process of refinancing my home. I owned the house before I recently remarried and I wish to keep the title in my name only rather than adding my wife to the title of the property.

I have seen you discuss this before in your column. How do I do this?

Answer: Even though Washington is a community property state, you can keep the house separate because you owned it before the marriage. For example, you could hold title as “John Smith, a married man, as his separate property.” When you apply for the mortgage, you would fill out all the forms by yourself. Do not include your wife’s income or assets, because if you do, the lender will insist that your wife’s name be added to the title. But be aware that your income and credit record alone must be sufficient to qualify for the mortgage. If you don’t make enough money to qualify for a loan, or if you have a poor credit rating, you may be forced to add your spouse to the mortgage.

Even if you are able to qualify for a loan based solely on your personal income and credit, the mortgage lender and/or title company may raise questions about potential community property interests of your spouse. Therefore, you should be prepared to have your wife sign a quit claim deed to you at the close of the loan. She may also be required to sign other documents “acknowledging” the loan.

The documentation requirement varies from lender to lender. It may sound confusing, but your wife does not have to own an interest in your house in order to sign a quit claim deed to you. That document merely states that she releases whatever claim or interest she has in the property — if any. This is not required by law, but mortgage lenders are very worried about being sued by a spouse who may claim at a later date that he or she was not aware that the house had been encumbered by a new mortgage. That’s why lenders also typically require the non-owning spouse to sign documents acknowledging that a new loan has been placed on the property.

Finally, you should be aware that your combined marital income is considered “community funds.” Since some of those funds are probably being used to make the mortgage payments on your house, your spouse may eventually acquire an “equitable lien” against the home if you are using your joint bank accounts to make the loan payments and cover maintenance and repair costs. So you may want to consider setting up a separate bank account specifically to handle the expenses related to your house.

However, I’m not sure that will work for your primary residence. If you have a rental house, the house will often generate enough rental income to cover all expenses and avoid using any community funds. But your residence does not generate an income stream, and therefore there is no way to pay the mortgage and expenses without using your personal money, which again would be probably be considered community funds.

Please consult an attorney and/or an accountant for professional advice on how to avoid using community funds to cover your home mortgage and home maintenance expenses in the future. Simply having separate bank accounts may not be enough to satisfy the community property laws in this state.

Steve Tytler is a licensed real estate broker and owner of Best Mortgage. You can email him at business@heraldnet.com.

More in Herald Business Journal

Mother-in-law homes popular after cities ease restrictions

Lynnwood and Everett are seeing a spurt of growth after changing city codes to allow for this development.

3 must-try doughnuts when Top Pot opens in Edmonds

After two years of work, the popular Seattle chain is opening its second Snohomish County location.

Facebook bans Trump-affiliated data firm Cambridge Analytica

The company allegedly held onto improperly obtained user data after claiming to have deleted it.

Boeing’s newest 737 Max makes first flight over Seattle

Prospects for the new aircraft — the Max 7 — are hazy, as low-cost carriers migrated to larger models.

Boeing’s an early casualty as investors dig in for trade war

The company’s share price is headed toward its biggest weekly slump in more than two years.

A niche Bothell publisher is becoming a mortgage matchmaker

Scotsman Guide has long served lending professionals. Now it’s offering information to borrowers.

Superstore chain Fred Meyer to stop selling guns, ammunition

Guns have been sold at nearly 45 of more than 130 stores in Oregon, Washington, Idaho and Alaska.

Trump’s possible China tariffs bring loud protests — in US

A potential trade war could reverberate across the U.S. economy.

Nike president to leave as company reviews improper conduct

By Matt Townsend / Bloomberg Nike is reviewing improper conduct at the… Continue reading

Does the IRS have your money?

The agency says it has refunds worth $1.1 billion just waiting to be claimed.

Federal investigation into Wells Fargo broadens

Wells Fargo already is wrestling with the aftermath of a scandal in its retail banking unit.

LL Bean: No bonus after tough year, more jobs to be cut

CEO Steve Smith said nearly 500 workers took advantage of a voluntary early-retirement program.