What are the Options if Your Spouse Has Bad Credit?

1. Blog: Mortgageexpertsonline.co.uk What are the Options if Your Spouse Has Bad Credit? If you’re looking to apply for a new mortgage with a partner, you will have the option to apply individually (as a single applicant) or as a couple (joint applicants). Why, then, would you want to leave your spouse off the application form? Annoyingly for some, lenders usually won't average out your two credit scores (or rely on the highest) when figuring out your creditworthiness as a team - they pay the most attention to the lowest credit score. If your credit rating is pristine but your spouse's is at rock bottom, it’s highly likely that a joint mortgage application will be denied. Lenders also study your debt-to-income ratio (DTI), which contrasts the total amount you owe each month with your earnings, in order to determine your eligibility. If your partner has a considerable amount of debt compared to their income and the mortgage is a joint application, then there’s a strong chance it will be denied. Even if your joint mortgage application is approved, your partner’s weak credit score or high DTI could leave you with a heftier interest rate payment than if you'd applied as an individual. With a loan as massive and as long-lasting as a mortgage, a higher interest rate can end up setting you back you tens of thousands of pounds or more over the lifetime of the loan. But the good news is that some providers of bad credit mortgage loans may be able to help you out. Thankfully, lenders place a different weight on the criteria they use. Some prefer to put more emphasis on factors other than your credit score, such as DTI. Therefore if your partner has a low debt-to-income ratio, it may help to outweigh their credit problems. Another approach that could reduce the damage caused by their poor credit could be to stump up a larger down payment, which demonstrates to the lender you don't need to borrow as much. In addition, many providers of bad credit mortgage loans offer schemes for first-time buyers that are typically slightly more lenient when it comes to evaluating credit criteria. For instance, many provide FHA loans, which are part of a government initiative that enables down payments as low as 3.5% where the customer has a credit score so low that it would otherwise be cause for refusal. Some bad credit mortgage loans providers offer other varieties of first-time homebuyer mortgages, including Fannie Mae’s HomeReady Mortgage, which allows for lower income and credit scores than those typically demanded for a conventional mortgage. Source: https://www.mortgageexpertsonline.co.uk/what-are-options-if-your-spouse-has- bad-credit