April 26, 2017
When buying and financing a home with someone else, everyone
on the loan application will be evaluated. For instance, say a couple decides
to buy a house and apply for a loan. Each person is approved individually and
both must be approved before the loan can go through. Let’s say one person
makes $5,000 per month and the other $6,000. The lender will add those two
together when calculating qualifying income. Yet both must adhere to other
employment requirements. Both must be employed for at least two years, for
example. If one person has two years but the other only six months, the person
with only six months on the job won’t be able to use that income to help
Okay, but what if they both have been on the job for two
years or more and the income on the application can be used, what happens if
one person’s credit score is too low? What happens if a spouse or partner has
bad credit, can the other person get a mortgage? Yes, but perhaps not in the
way some people think. Credit scores are three digit numbers ranging from 300
to 850 and different loan programs can have different credit score minimums.
For example, a lender might have a loan for an investment property and the
minimum credit score with a 20% down payment is 660. One borrower has a score
of 750 while the other a score of 580. Some think that lenders average the
credit scores together but that’s not the case. Lenders do typically use the
lower of the two representative scores. In this example, the qualifying score
would be 580, below the 660 minimum. The loan cannot be approved.
However, if one borrower has enough income to qualify
individually without the need for additional income from the borrower with the
580 score, they can keep the person with the lower scores off the loan
application as long as the remaining borrower can qualify on the monthly credit
obligations of the person with the low score. If someone can handle all monthly
debts of both borrowers and still qualify for the new mortgage, the loan can
still be approved, regardless of the lower score.
For more information or questions about mortgage loans, please call (855) 757-8748.