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There are plenty of good reasons to buy a home these days. If you’re working remotely due to the coronavirus pandemic, you may have a more flexible job schedule, which will make it easier to scope out homes and deal with your mortgage application. Also, mortgage rates are extremely low, so it pays to take advantage and lock a home loan in.
But what if you’re applying for a mortgage jointly with a spouse, and his or her credit score leaves much to be desired? Will you qualify for a mortgage if your credit score is strong, but your spouse’s isn’t?
When your spouse’s credit score needs work
You might assume that if your credit is great, but your spouse’s isn’t, mortgage lenders you will just average your two scores and go with that number. But that’s not really how it works. While your strong credit could help compensate for a spouse’s poor credit to some degree, ultimately, lenders will fixate on the lower of the two scores.
Say your credit score is a 790, which is excellent, while your spouse’s score is a not-so-great 620. A 620 is usually the minimum credit score required for a mortgage, so in this scenario, you might get approved for a home loan, but not get offered the most competitive rate. On the other hand, if your score is a 790 but your spouse has a 540, that super-low score could potentially ruin your chances of getting approved, despite your great credit.
Should you apply for a mortgage solo if your spouse has bad credit?
When there’s a huge gap between your (strong) credit score and your spouse’s, one solution could be to apply for a mortgage on your own rather than apply jointly with your spouse. This will only work, though, if you earn enough money to cover your housing costs on your own.
In addition to credit score, lenders will look at your existing income to see if it’s high enough to qualify for the loan you’re seeking. If your income isn’t high enough to snag that mortgage, and you need your spouse’s income factored into the equation, then you’ll have to apply for that loan jointly. That’s when your spouse’s poor credit could be an issue. Unfortunately, you can’t have it both ways — you can’t count your spouse’s income on your application, but not his or her credit score.
How to help your spouse’s credit improve
If you have a spouse whose credit needs work, it could pay to bring that number up and then apply for a home loan. First, have your spouse get a copy of his or her credit report to see what it looks like. If there are errors on that report that work against your spouse, correcting them could boost his or her score quickly.
Next, see why your spouse’s score is so low. Is it because of a late payment history? Too much credit card debt? If there are delinquencies on your spouse’s credit record, it could help to get current on those payments, and then pay on time from that point onward. Similarly, paying off a large chunk of existing debt could help your spouse’s score improve.
In many cases, applying for a mortgage along with a spouse puts you at an advantage — namely, that you’ll have two sets of income to present to lenders. But the flipside is that you’ll both need good credit to snag an affordable mortgage rate. If your spouse’s credit score is poor, it could prove problematic. Figure out a backup plan, whether it’s applying for a mortgage on your own or taking steps to bring that bad score up quickly.
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