My Spouse Has Bad Credit: Can We Still Buy A House?
Your credit score is one of the most important pieces of information about you when it comes to borrowing money. Mortgage lenders use your credit record to help them make a decision on whether they should lend to you. If you’re married and you are ready to buy a house and then only found out you are unable to qualify for mortgage because your spouse’s credit is not that great. What can you do? Read on how to buy a house with a spouse has bad credit?
Before you give up on your dreams of home in Phoenix, take a look at the following options for buying a home with bad credit and determine what path makes the most sense for the two of you.
Find why credit score is low
Check your partner’s credit report. Most of the time you can find out why causing that. Too much debt? High balance? Error in credit report? Once you find out the cause, take appropriate step to resolve it. It may take some times or may delay purchasing your dream home but it will be the best for both of you.
Get the mortgage on your own
You decided you don’t want to miss the boat with low interest rate and ready to buy now, you can just apply for mortgage just by yourself. The lenders will look at only your entire financial picture to determine whether you qualify. That means your own income, assets, and creditworthiness need to meet the lender’s requirements. Since now the lender only take one income as consideration, you may qualify for a lower loan amount.
Your lender may look at your spouse’s debt
Since Arizona is a community property state and if you are getting a FHA or VA loan, both spouses’ debts will be taken into consideration. If your spouse has high debt and overall debt-to-income (DTI) ratio can have a huge impact on your home loan.
Try a larger down payment
You can still try to qualify for a mortgage together. While typical down payments range from 3.5% to 20% of the home’s purchase price, you may be able to persuade a lender to approve you and your spouse for a mortgage if you put a much larger percent down — perhaps as much as 50%. This gives the lender confidence that it won’t be completely down and out if you run into trouble paying your mortgage.
Consider a co-signer
Another option is to consider asking someone to co-sign the home loan with you. Another person with a good credit score, sufficient income, and a low debt-to-income ratio could help you qualify for the mortgage. Keep in mind that the co-signer will be financially responsible for the loan if you default — and even if you have no intention of defaulting on a loan.
The bottom line
Buying a home with spouse’ has bad credit can be difficult — but it’s not impossible. Boost yours and your spouse’s credit scores by trimming debt, fixing errors on your credit reports and saving up a big down payment. You can also secure alternative financing to buy a home.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ area, we hope you will consider us. Contact us today for complimentary consultation.
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