My partner has bad credit. Are we going to get a mortgage?
There are many good reasons to buy a home today. If you are still working remotely, you can have a more flexible work schedule, which will make it easier to find housing and process your mortgage application. Also, mortgage rates are very competitive, so it pays to take advantage of and lock in a home loan (but keep in mind that the limited number of homes for sale and higher house prices could make it difficult to buy. of a house today).
But what if you are applying for a mortgage together with a spouse and their credit rating might take some work? Will you qualify for a mortgage if your credit rating is good, but your spouse’s not?
When your spouse’s credit score needs a job
You might assume that if your credit is great, but your spouse’s not, mortgage lenders will simply average your two scores and track that number. But that’s not really how it works. Your strong credit could help offset a spouse’s poor credit to some extent. But in the end, lenders will focus on the lower of the two scores.
Suppose your credit score is 790, which is great, while your spouse’s score is not as strong at 620. A 620 is usually the minimum credit score required for a mortgage, so in this scenario , you could get approved for a home loan. without the most competitive interest rate.
On the flip side, if your score is 790 but your spouse has a 540, that low score could potentially ruin your chances of getting approved for a mortgage, despite your excellent credit.
Should You Apply For A Solo Mortgage If Your Spouse Has Bad Credit?
When there is a huge gap between your (strong) credit score and that of your spouse, one solution might be to apply for a mortgage on your own rather than applying jointly with your spouse. However, this will only work if you earn enough money to cover your housing costs on your own.
In addition to the credit score, lenders will look at your income to see if it is high enough to qualify for the loan you are looking for. If your income is not high enough to land that mortgage and you need your spouse’s income to be factored into the equation, then you will need to apply for this loan jointly. This is when your spouse’s bad credit could be a problem. Unfortunately, you can’t have it both ways – you can’t count your spouse’s income on your application, but not their credit score.
How to improve your spouse’s credit
If you have a spouse whose credit needs improvement, it may be beneficial to increase this number and then apply for a home loan. First, have your spouse get a copy of their credit report to see what it looks like. If there are any errors on this report that work against your spouse, correcting them could increase their score quickly.
Then see why your spouse’s score is so low. Is it because of a history of late payments? Too much credit card debt? If there are any defaults on your spouse’s credit report, it might be helpful to keep track of those payments and then pay on time from then on. Likewise, paying off a large chunk of existing debt could improve your spouse’s score.
In many cases, applying for a mortgage with a spouse gives you the advantage that you will have two sets of income to present to lenders. But the flip side is that you both need good credit to get an affordable mortgage rate. If your spouse’s credit rating is bad, it could be problematic. Find a back-up plan, whether it’s applying for a mortgage on your own or taking steps to quickly raise your spouse’s score.