Legal Question in Real Estate Law in California

Re: Name on Title but not on Loan

The title is the more important of the two documents. The fact that you are both on title gives you ownership in the manner in which you took title. The house is the primary security for the loan.

Re: Name on Title but not on Loan

A lawyer would be ill-advised to tell you that this arrangement will "never" result in a legal problem. On the other hand, it's fairly common.

I assume you'll be taking title to the home as community property. Unless the money being used for the down payment (or mortgage payments) comes directly or traceably from "separate property" sources such as pre-marriage accounts, inheritances, gifts, etc., your interests in the house will be equal. The fact that your spouse's salary is used to make the mortgage payments does not give him a gradually-increasing share of ownership, because his income (from employment) is considered community income.

One spouse cannot sell or encumber (borrow against) community real property without the consent of the other. I frankly don't know how lenders who lend on the strength of one spouse's credit handle this; logically, I suppose all that is required is the non-borrowing spouse's consent on a separate form. However, I have also heard that lenders may be requiring the non-borrowing spouse to quitclaim to the borrowing spouse. The effect of this, of course, is to transfer full ownership to the borrowing spouse and the house is then no longer community property. I hope another attorney will provide us with an answer as to the current and usual practice of lenders.

A few other aspects deserve mention. First, as a non-borrower, your credit rating is less likely to be impacted, plus or minus. Next, in the event of a divorce or the death of either of you, division of assets and liabilities may be more complex. Finally, just because you aren't a co-borrower doesn't mean that you may not be, or become, liable for a future failure to make the loan payments.

Re: Name on Title but not on Loan

The general rule in California is that any property obtained during the marriage is community property unless the property is within one of the few exemptions. Property purchased during the marriage is community unless it can be proved that the purchase was made with separate property funds.