Your FICO credit score is sterling. Your spouse's however, is
not. Will this make it a challenge to qualify for a home loan with
The short answer? Yes.
If your spouse's credit score is too low -- 620 or lower -- you
might want to apply for a mortgage in your name only. If you don't,
lenders might either saddle you with higher rates, fees or outright
deny your application.
The good news?
Just because only your name is on the mortgage loan doesn't mean
that both you and your spouse can't both be listed as the owners of
your home. You can still put your spouse's name on the home's title
even if only your name is on the mortgage loan.
Based on the worst credit score
"Your spouse's lower score might make it hard to get a mortgage or
get a mortgage at a good rate," says Anthony Sprauve, director of
public relations with myFICO.com in San Jose, Calif. "Lenders don't
take an average between your two scores."
Rather, mortgage lenders base their loan decisions -- including
the mortgage rate -- on the lowest
between you and your spouse, says Don Frommeyer, president of the
National Association of Mortgage Brokers and senior vice president
of Amtrust Mortgage Funding in Carmel, Ind. If your credit score is
800 and your spouse's 650, lenders will assign an interest rate
based on your spouse's lower score, he says.
"It's worst-case scenario," Frommeyer says. "Even though one
spouse might have a great credit score, it's all based on the worst
Applying for a mortgage without your spouse
So when does it make sense for you to apply for a mortgage loan
without your spouse?
Sprauve says that lenders today reserve the best mortgage rates for
borrowers with FICO scores of 740 or higher. Borrowers with scores
of 600 or lower will struggle to even earn approval from most
lenders. If your spouse, then, has a credit score that low, you
might think about applying for a mortgage loan on your own.
A two-income economy
Applying for a mortgage on your own brings up another challenge.
Lenders also look at your debt-to-income (DTI) ratios when deciding
who qualifies for home loans.
Most lenders want your total monthly debts -- including your
newly estimated mortgage payment -- to equal no more than 36
percent of your income before taxes are taken out. If you are
relying solely on one income, leaving the money generated by your
spouse on the sidelines, you might struggle to meet the lender's
DTI ratio. You might be forced to apply for a smaller mortgage loan
on a less expensive home.
"Our economy is largely built today on two-income families," says
Van Davis, president of broker operations for ZipRealty in
Emeryville, Calif. "It's hard for many people to afford the luxury
of home ownership when relying on only one income. I live in the
San-Francisco-Bay area. Relying on one income would be problematic
for a great number of buyers out here."
What options do you have?
Go at it alone:
If your income is high enough, or if you and your spouse aren't
opposed to living in a smaller, less expensive home, it might make
sense to apply for a mortgage on your own, especially if your
spouse's credit score will leave you with a more expensive
If a spouse's credit score is making conventional financing
difficult, consider a mortgage insured by the FHA. While the FHA
doesn't have specific credit score requirements, FHA mortgage
lenders typically reserve the best rates for borrowers with credit
scores of 620 or above, says Keith Gumbinger, vice president of
If you're dependent on both incomes, it's time to help rehabilitate
your spouse's credit. Your spouse can boost their bad score by
paying bills on time and in full every month, fixing any
credit-report errors, eliminate disputed accounts, and keeping
credit lines open but learning to use them wisely.
Maxine Sweet, vice president of public education for Experian,
says that consumers with bad credit can start seeing improved
scores after just six to nine months of mature financial behavior.
Depending on how low the spouse's score was, it could take less
than a year for your spouse to have a solid enough credit score to
help secure your mortgage.