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Mortgage When My Spouse Has Bad Credit

Mortgage When My Spouse Has Bad Credit
Mark Cappel
UpdatedOct 7, 2007
Key Takeaways:
  • 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.
I am married, have a good credit score, and my spouse has bad credit. Can I apply for a mortgage on my own?

I have been married for about one year and we want to buy a condo, but my spouse has bad credit that will hold us back on a good loan. My credit is good. Can I apply for a loan on my own, for the purpose of buying a house as a married person? I would need to borrow about $250,000. I am a teacher (15 years).

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 four things in a perfect borrower:

  1. stable income — 2 years or more
  2. attractive credit history — a high credit score and few mishaps
  3. low debt-to-income ratio — the less debt you have the better
  4. a down payment — a minimum of 3.5%, but more is better

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

bills.com

10 Comments

JJasmine Rios, Dec, 2022
I have a good credit score but am unemployed, my husband has a bad credit score but has a good income. Is there anyway to use my credit score and his income to try and qualify for a house?
MMatthew Smith, Nov, 2022
I had worked with several credit repairer to get my mortgage late off my credit and I noticed the problem is even if it is removed by the Credit Bureau, when the Bank reports again the following month, it will be back on. You must get the bank to remove it and they usually won’t. The bank process usually takes years and I needed a good credit to buy a house, luckily for me I got to know there’s this credit expert who help to repair credit in few days, I taught he wouldn’t be different from others I had tried but I still texted him on cybspace279 @ gmail, just to try my luck. Cyber Space was actually confident about what he does and he gave me his word “I WILL FIX YOUR CREDIT” He delivered what he promised. Every negative Items on my report was removed, late payments turn on time payment and my credit score increase to 820 It’s almost six months now, no banks reports. Just last month I bought my new house in Ohio, thank you so much Cyber Space you literally give me a new home lol,
oode, May, 2014
My husband and I both own homes (with mortgages <20% equity). We are looking to purchase a house together. My credit is great, his is fair. Currently we live in my home, and rent his (it has been rented for 1.5 years). I am the breadwinner, but he does have some income. In our situation, it may be best for me to qualify for a mortgage on my own. We file taxes jointly and I am currently working with a lender that is checking if we have to claim the loss from our schedule e (for his house) if I am the sole borrower. Is that possible?
BBill, Jun, 2014
Shop around and ask lenders if you qualify alone. One spouse on a mortgage and title usually causes fewer problems down the road.
KKristin, May, 2014
My husband has substantial debt through his student loans. I want to buy the house by myself. If his loans default, can debt collectors take the home since we are married? Or will they have no right to it?
BBill, May, 2014
You indicated you reside in New Jersey. If the house you plan to buy is in New Jersey, then it is likely New Jersey collection laws will apply should your spouse default on the student loans.

See the Bills.com article New Jersey Collection Laws to learn more about the laws that apply, in particular the section "New Jersey Spousal Debt Liability." Please ask any follow-up questions you may have on that page.
cchristine, Apr, 2014
How does this apply in community property states? With just my husband, we can afford $200k. With me added, banks won't even glance in our direction. We have $25k for a down payment. Can my husband purchase a house on his own?
BBill, Apr, 2014
There seems to be an urban myth that both spouses must buy real property together. Not true! One spouse can buy property by himself or herself.

Lone spouses buy real property in community property states commonly. The purchasing spouse can have excellent credit while the non-purchasing spouse has poor credit.

Some lenders with conservative underwriting policies may choose to pull the credit report of the non-purchasing spouse to learn how much debt he or she owes that may be community debt. But not all have this policy.

You indicated you reside in Wisconsin. Wisconsin has a unique rule that requires lone spouses who wish to borrow to notify their spouse of the loan. Therefore, expect the lender to require you to attend the closing and sign disclosures you're aware your spouse is about to agree to a home loan.