- Review how to apply for a mortgage when your spouse has bad credit.
- Understand how debt to income ratio affects qualifying for a mortgage.
- Examine how a credit score is determined.
BILL'S ANSWER
The quick answer is: Yes! You need not apply for a joint mortgage with your spouse.
Generally speaking, if you and your spouse apply for a loan jointly, the lender will look at your combined income, combined debt-to-income (DTI),and both of your credit scores. If your spouse does not have income, or you do not need his or her income to qualify, then you may apply for a loan without him or her.
Banks want three things in a perfect borrower:
- Stable income
- Attractive credit history
- Low debt-to-income ratio.
If a potential borrower lacks in any one (or more) of these, the potential borrower find qualifying for a loan difficult.
Work with a broker and see what mortgages you qualify for. Download a Uniform Residential Loan Application (Form 1003), complete it using only your income and credit. Then, complete a second Form 1003 with both your income and the income of your spouse. Finally, start shopping. Get mortgage quotes from up to four pre-screened lenders from Bills.com.
Reasons to Apply for a Joint Mortgage
If your low-credit-score spouse makes a high income, there is a chance his or her income would improve your DTI ratio and thus increase your likelihood of obtaining a loan despite the low credit score.
Some spouses feel more secure in a property where their name is on the lease or mortgage. When both spouses are on a mortgage and one spouse dies, the other can assume the mortgage and depending on how the property is titled, the surviving spouse will have 100% ownership of the property without it going through the probate process.
There are legal tools available that bring a non-signatory spouse to the same place legally. Regarding the death of the mortgaged spouse, the ownership of the property can be handled with a will or trust. Life insurance can pay the mortgage if the signatory spouse dies.
Reasons to Not Apply for a Joint Mortgage
However, if you apply for a mortgage on your own, you solely carry the burden of that mortgage obligation. If you default you alone have liability. This can be a positive or negative depending on your perspective. Let us assume your spouse rebuilds his or her credit score. Let us assume you and your spouse encounter unexpected financial difficulty, and become delinquent on the mortgage, or allow a foreclosure. Your credit score will take the fall, while your spouse becomes a credit score lifeboat that allows you two to continue to find credit.
Or let us assume an equally dire circumstance where you and your spouse decide to divorce. Usually one spouse will want to stay the marital property. In that case, there is is a 50-50 chance the spouse who has the property in his or her name alone will keep the status quo on the mortgage and title. If the mortgage is jointly held there is a 100% chance the mortgage will need to be refinanced to remove the non-occupying ex-spouse from the mortgage. For these two reasons I recommend that if spouses, partners, friends, or family members who wish to occupy a house together can afford to do so they put the property in one person's name only.
Recommendation
First, a competent mortgage loan officer will explain how to qualify for a mortgage. A great loan officer will help you find the best loan for your needs. Visit the Bills.com mortgage savings center to get no-cost quotes from up to five pre-screened lenders.
Second, if you have a high credit score and your spouse does not, do not to add yourself to your spouse's credit cards. Add your spouse to your cards as an authorized user, which will help pull their credit score up. The spouse with poor credit should pay off any delinquent cards or accounts as quickly as possible and negotiate a pay for delete to remove these harmful accounts from their credit report.
Third, it might be important to understand how a credit score is calculated. A credit rating is based on several variables, including:
- Payment history (do you have any late payments, charge-offs, etc.)
- The amount and type of debt owed
- Any maxed-out trade lines
- Several secondary factors including length of credit history and how many recent inquiries have been made on a credit history.
Paying down maxed-out trade-lines will almost always boost a credit score. If you would like more information, please visit the Bills.com credit resource page.
Finally, spend a few minutes to learn if a no-cost mortgage is right for your situation.
I hope this information helps you Find. Learn & Save.
Best,
Bill
Pembroke Pines, FL | January 31, 2012
January 31, 2012
Pembroke Pines, FL | February 01, 2012
February 01, 2012
Matteson, IL | January 24, 2012
January 25, 2012
Bedford, NY | January 23, 2012
January 23, 2012
The FHA requires, in cases of community property states, that the non-purchasing spouse provide information about their income and debts, as well as provide an accurate credit report. For more information about a FHA loan see the Bills.com article FHA loans.
Staten Island, NY | January 10, 2012
January 11, 2012
Speak with a loan officer. If you don't qualify, then ask the loan officer what credit score you need in order to qualify, and take the right steps to improve your credit score, if necessary. It may delay your purchase for a number of months, while you work to improve your score, but there is no way around that, if your income is needed to meet the lender's debt-to-income requirements.
Cumming, GA | January 09, 2012
January 09, 2012
San Diego, CA | December 26, 2011
December 27, 2011
Lake of the Woods, OR | December 24, 2011
December 27, 2011
At the same time, she should speak with her BK lawyer, to get his or her opinion on what she should do and not do, to make sure her BK goes through and no problems arise.
Plainfield, IL | December 16, 2011
December 18, 2011
- Credit Score: Since the payments are being made on time, your credit score has not been negatively impacted by the current mortgage. Even if your ex refinances, the old loan will still show on your credit report and its positive history will help your score.
- DTI: Taking your name off the loan will decrease the amount of debt you have, including the monthly payment. Consult with your lawyer and learn what actions can be taken to induce your ex-husband to refinance as soon as possible. As long as you are on the loan, then you will be responsible for the repayment of the loan. If you are looking to a purchase a home and are concerned about the loan's effect on your DTI, it may be possible to have the current loan payment excluded from your DTI by providing the underwriter with proof that your ex is responsibly making payments on his own.
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