real estate

Home mortgage a matter of trust for wife

Steve McLindenQuestionDear Real Estate Adviser,
My husband and I are buying a house . I don't have any credit whatsoever so the real estate agent said I needed to sign an interspousal deed. I'm afraid if I do this, I am transferring my rights to the house wholly to my husband. The Realtor said I can simply be added to the title once escrow closes. Is this true? Why is an interspousal document needed here?
-- Janet

AnswerDear Janet,
You are being asked to sign an interspousal transfer deed, also known as an interspousal transfer grant deed. This is likely because your credit doesn't meet the mortgage lender's creditworthiness standards, at least at the more favorable loan terms being offered to your husband.

Hence, if the home loan is being extended to your husband, the property will initially be in his name only. In this case, such a strategy separates a community property into a separate property owned by your husband and keeps your loan payments more affordable.

The real estate agent is right that this can be reversed quickly, if not immediately, after closing. Of course, you will need to make clear to your husband that this is what you want. For reassurance, talk with the title officer handling your transaction. He or she should be able to explain the process, which will consist of recording a new deed after closing, signed jointly by you and your spouse.

You and your hubby should understand that in the event you two split up, he may be solely responsible for that home loan unless you two go the next step and refinance into a loan in both your names. Similarly, you would not be legally entitled to any proceeds if there was equity accumulated in the home over time and your husband was to resell it absent that suggested two-party refinance.

Ideally, you will establish credit with him through jointly owned credit cards and/or joint purchases that will build your score and facilitate such a refinance as soon as possible.

For the sake of partnership and equitableness (and in your case, equity) you should both strive to jointly refinance the loan by a set month and year.

By the way, interspousal transfer deeds are also employed during divorces to separate community property, but such uses during home purchases are also quite routine today. This is especially true with so many people incurring damaged credit during the downturn. So it doesn't sound like anyone is trying to pull a fast one here.

It sounds as if you'll have to trust your hubby on this one. Good luck to you both!

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