Wife/Husband - who should buy houses

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Wife/Husband - who should buy houses

Anthony Charles
Investor · Cary, NC · Member since 2009 · 9 posts · 1 vote

I am going to purchase two investment houses (single-family homes, SFH) this summer, and would like to do another two next year.

I need advice on whose name to title the property, and how to proceed with the mortgages.

Here's the situation

House A (my primary residence)
House B (wife's primary residence; she also rents to a roommate)

We just got married, about a year ago, and because of school & jobs will likely be separated for a bit longer. House A & B are in different states.

House C (investment property - SFH)
House D (investment property - SFH)

We are purchasing these this summer. The houses are located directly next to one another.

Currently, I have qualified for the mortgages b/c my wife is still in school and therefore has no material income (~15k/year).

Both of us have very good credit scores, but her income poses problems when it comes time to get a mortgage.

My current intention is to have the mortgage in my name, and the title of the properties in both our names.

However, next year we would like to purchase another two houses.

House E (investment property - SFH)
House F (investment property - SFH)

My concern is that there seems to be some rule, or difficulty, in securing more than 4-mortgages in the same persons name.

How does this rule work - does it only depend on the mortgage? Or does it matter whose name is on the title?

How should I get these the mortgages and titles of these investment properties? Both this year, so I don't create a problem in the future, and next year.

Somewhat related - am I going to run into a problem next year b/c 2-years of rental income on the tax return are needed in order for them to count?

Also, if we file jointly (taxes) - who does the rental income count towards? For example, next year will I be able to count my wife's roommate rental income on my loan application for the new houses?

Any advice would be appreciated.

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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
16y

Perhaps this is somewhat state dependent. I have two properties here in CO that I own without my wife. On both of these properties, I'm the only one on the title and I'm the only one on the deed of trust. If she had income (and the desire) to cover a mortgage separately, my wife could buy properties in here name. Since we own our primary together, we could theoretically each buy three more houses. When I took out these loans, the lender did not request her to be on the loan or on title.

If you have enough income to cover the mortgages without the rental income, you won't have a problem. I believe if you need to include the rental income to qualify then you may indeed have a problem until the rents have shown up on two tax returns.

You really need to find a smaller, local bank that does real estate loans and have a conversation with them. While there are Fannie Mae guidelines, you may be able to do something different if you have the right lender. You may find lenders pretty skeptical about this sort of business plan until you have a track record. Buying four investment properties in 15-18 months may prove to be a challenge.

Also keep in mind that down payments are pretty high - 20-25%, maybe even 30%. So, you'll need some serious cash. The lender will also want to see cash reserves in the bank.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    16y

    Hi, I'm going to leave some of those questions to others. As to mortgages, if you are married both of you will be on the deed of trust as husband and wife and if her income is used to qualify you will both be on the note. Depending on state law, where the property is located, each of you have a marital interest in each other's property, that came with the "I dos"! It takes one to buy and two to sell, so both of you will need to sign the security agreement, but only one might sign the note, but realistically, the lender will want both of you on the hook. Which takes us to the four property rule....you both are in title or are responsible (deed of trust) so there you go, you don't get to buy eight by buying as married owing seperately, lol. It's not a tax return option or a savings account for FDIC coverage. Good luck, Bill

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    16y

    Perhaps this is somewhat state dependent. I have two properties here in CO that I own without my wife. On both of these properties, I'm the only one on the title and I'm the only one on the deed of trust. If she had income (and the desire) to cover a mortgage separately, my wife could buy properties in here name. Since we own our primary together, we could theoretically each buy three more houses. When I took out these loans, the lender did not request her to be on the loan or on title.

    If you have enough income to cover the mortgages without the rental income, you won't have a problem. I believe if you need to include the rental income to qualify then you may indeed have a problem until the rents have shown up on two tax returns.

    You really need to find a smaller, local bank that does real estate loans and have a conversation with them. While there are Fannie Mae guidelines, you may be able to do something different if you have the right lender. You may find lenders pretty skeptical about this sort of business plan until you have a track record. Buying four investment properties in 15-18 months may prove to be a challenge.

    Also keep in mind that down payments are pretty high - 20-25%, maybe even 30%. So, you'll need some serious cash. The lender will also want to see cash reserves in the bank.

    2Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    16y

    Good point Jon and yes it can be by state, however it's secondary market. It's a good idea to use small local banks, if you can get a decent deal. But then again, prudent lending practice should be that anyone having an interest in or to the secured property should be one the security agreement. While people with means may get the arrangement Jon described, there is a maritial interest and when you sell, the title company will want both to sign off.
    Jon makes a good point too on the tax return and income sufficient to pay the debt. If you have properties in an LLC for example and you don't need the income to qualify for a new loan, that might help too. Thanks Jon for pointing that out! Bill

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  • Matt Eilers
    Real Estate Agent · Grand Junction, CO · Member since 2008 · 68 posts · 35 votes
    16y

    It could be state dependent but I am under the impression that if you are the only person that applies for the loan, then you are the only person that goes on contract and gets recorded as the owner.
    You may ask the mortgage company/title company about a Quitclaim Deed to add your wife on at a later date.

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