For better or for worse, for richer or for poorer, in sickness and in health, to love and to cherish, till death do you part.
But what about in Excellent and Poor credit? Good husbands and wives learn to live with their spouse’s weird habits, but a significant other’s bad credit score is a more serious headache, especially when you’re applying for a mortgage. After all, moving into your first home together and starting a family is a major step for many married couples.
Don’t worry: You can still get into a home, even if your spouse’s credit history is a little spotty. It will just take a bit more planning. Here are some options that one or both of you can pursue to get into a home and foster your marriage (and credit score) for years to come.
Leave Your Spouse Off of The Mortgage
The problem with applying for a mortgage with your spouse, assuming they have bad credit, is that it impacts your ability to qualify. Even if you have excellent credit, you’ll find that your score gets watered down by their poor credit. This could limit how much you qualify for, and will definitely impact how nice of a rate you can get.
The easiest way to dodge these problems is to apply for a mortgage by yourself. You’re not required to involve your spouse (or their credit burden) in the application. They can still be included on the deed in most cases, even if their name isn’t on the mortgage.
It’s the simplest option, but it might not be your best option. Remember, if they don’t apply for the mortgage, their income can’t be considered either. Unless you’re bringing home most of your household’s spending money, you’ll probably end up qualifying for less.
Still, there’s a workaround: If your spouse has a significant amount of cash but poor credit, they can give you a cash gift instead. If you use this gift toward a down payment, you can afford to borrow less to pay for the home.
Get A Cosigner
Even if their credit situation means that your spouse can’t join you in applying for a mortgage, that doesn’t necessarily mean you need to go it alone. One popular option that can help elevate your mortgage qualifications is to bring on a cosigner.
A cosigner is a qualifying relative who agrees to shoulder responsibility for the mortgage if the buyer is unable to pay. This is a popular option for younger applicants because it allows them to qualify for a better rate with help from mom and dad, without actually needing those loved ones to live on the property.
This is an especially nice option if you’re on good terms with your in-laws, because they’ll be willing to lend a helping hand to their baby, especially if their son or daughter-in-law is in a healthy financial situation.
Even if this doesn’t put you in the best position, rate-wise, you can wait a few years for your partner’s credit to improve and then refinance at a better rate.
Have Them Become An Authorized User
How close is your spouse to breaking into Fair credit? If it’s within reach, maybe within 20 points or less, there are several simple “hacks” you can try to give their credit score a shot in the arm (for a larger list of hacks, check out this post).
Perhaps the easiest hack is to have them become an authorized user on a credit card belonging to someone with a more desirable credit score. They can request this help from their parents, or even from you.
They don’t need to use the card in order to gain benefits from it. Of course, they technically can use the card…hopefully you trust them to use your card responsibly if you trusted them enough to get hitched.
Get an FHA Loan Instead of A Conventional Loan
If your income alone isn’t going to be enough to get you the mortgage you want, or if you won’t be able to put enough toward a deposit to get the mortgage you qualify for, you may want to consider an FHA loan instead of a conventional one.
These government-backed mortgages are designed to help those with lower credit scores or cash reserves get into a home. If you have a 620 score, you can qualify for a mortgage with as little ast 3.5 percent down.
FHA mortgages can offer rates comparable to conventional, as well as allowing your spouse contribute their income toward qualifying for a higher total. Be aware that FHA loans come with other costs, however, such as mandatory mortgage insurance payments.
There are many variables that go into deciding what the best plan for you and your spouse might be. If you have any questions, speak with your lender and develop a sound strategy.
We have plenty of advice on mortgages, but here’s our only advice on marriage: Even if your credit is much better, don’t suggest they aren’t your “better half.”