Can same-sex couples refinance?
Although lenders always could consider two incomes in cases of two homeowners, some new rules may change tax implications.
The payments were late several times; however, it was always the first bill paid, regardless of my other bills.
Recently, my state government accepted our same-sex marriage and I'd like to know whether I can qualify to refinance the mortgage based on my spouse's income.
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A: There's been a lot of good news for gay and lesbian couples in recent years where states have allowed them to marry. Also new: the federal government granting tax benefits to these couples.
On Aug. 29, the Internal Revenue Service announced:
The U.S. Department of the Treasury and the IRS today ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple live in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.
Under the ruling, same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.
The following month, the IRS issued Notice 2013-61 providing guidance for employers and employees to claim refunds or adjust overpayments of FICA taxes and employment taxes with respect to certain benefits and remunerations provided to same-sex spouses.
Depending on how long you've been married, you may be entitled to refunds for the 2010 through 2012 tax years based on the new ruling. This would be a good time to work with a tax professional to explore these issues further.
You've always had the ability to own the house with your partner, now your spouse, and to have the lender consider both incomes and credit histories in considering a loan application. The issues prior to the ruling largely dealt with gift-tax ramifications when gifting the equity in the home to your partner so that both of you would be on the deed and the loan for the property, estate planning implications and how the property was titled. The change in the tax ruling treats same-sex spouses the same as heterosexual spouses when it comes to these issues.
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Regardless of sexual orientation, there have always been ways of adding other individuals to a new loan refinance in order to qualify.
FHA has allowed for even non-occupying co-borrowers to be added. FNMA's rules are a bit more complicated but fall under their "continuity of obligation" guidelines which can be "Googled" for a complete explanation. Basically, FNMA has escalating criteria to follow depending on the loan-to-value ration percentage (the percentage of loan amount compared to the appraised value). But if the hoped-for new borrower lives in the home, has been on title for 12 months, and/or made the mortgage payment for 12 months, he or she can be added to the new loan and help the original borrower qualify easier. At lower LTVs, less stringent rules apply.