Joint Mortgage Could Cost Consumers More

New Federal Reserve study shows that some couples may pay more on their mortgage if they apply jointly

Joint Mortgage Could Cost Consumers More
April 5, 2016

The Federal Reserve has released new research, which shows that some couples who apply for joint mortgages are borrowing at higher interest rates. This often occurs when the difference between the co-borrower’s FICO credit scores is fairly large. Lenders are generally required to use the lower of the two credit scores, which can greatly affect the interest rate. This rule is followed by most lenders, mortgage insurance companies, and investors such as Freddie Mac and Fannie Mae.

Many first-time homebuyers do not know about this rule, so they apply together. Research shows that many first-time joint borrowers have paid more than they needed to on mortgages made over the past ten years. This conclusion was made after examining a detailed set of data pulled from almost 604,000 mortgages granted between the years of 2003 and 2015. Almost ten percent of borrowers who applied jointly would have received a lower interest rate had the applicant with the better credit score applied singly. Of course, that applicant would have had to have an income high enough to qualify for the loan on their own.

The study showed in cases where one of the joint borrowers had a FICO score lower than 740, more than a fourth of the borrowers could have received a lower interest rate if only the applicant with the higher score had applied. Experts urge couples to discuss this option with lenders when they apply for a mortgage.

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irene | 04.05.16 @ 16:02
I had no idea it could cost more that way, great info.
Carla | 04.05.16 @ 16:02
This is all the more reason to watch your credit. I did not know this but it really makes sense that they use the lower score.
Nancy | 04.05.16 @ 16:04
There are so many inconsistencies in our financial system. This is another
Steffanie | 04.05.16 @ 16:04
I didn't even know this was an option. Thanks for bringing it to my attention.
trish | 04.05.16 @ 16:05
Wow. Never knew this. Shows you need to look into every option before making a decision. Sometimes the norm isn't the best way to go
Erin | 04.05.16 @ 16:05
This is great info for all home buyers. I had no idea that different FICO scores could affect your interest rate so much. Incredible!
Tina | 04.05.16 @ 16:06
Wow, I have never heard of this. Seems risky for some to put the house all in one spouse's name in case marital trouble arises. Thankfully my spouse and I have very similar credit ratings so hopefully signing up jointly didn't hurt us.
Heather | 04.05.16 @ 16:07
But the question is how many couples can afford to get the mortgage on their own when it takes two incomes to make a household work?
Chrisitna | 04.05.16 @ 16:07
Interesting! I wasn't aware that this was such a big discrepancy. It also pays to talk to several different lenders, because you get different information depending on who you speak with - I was told when we moved to Texas that I wasn't "allowed" to apply for a mortgage on my own by two lenders, and told that I was by two others. Very confusing!
Christina | 04.05.16 @ 16:10
Wow something else to look into when buying a home.. I did not know this. I will be asking our bank about the best way.
$commenter.renderDisplayableName() | 12.04.20 @ 15:09