By Steve Tytler Herald Columnist
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 firstname.lastname@example.org.