Does Your Spouse’s Credit Affect Your Loan?
There are far too many misconceptions circulating about what happens to credit after people get married. Some of them are more like urban-legends, including plummeting credit scores if your spouse has a heavy load of debt such as student loans. Nothing could be further from the truth.
Despite this type of over-the-top misinformation, there may be reasonable implications when it comes time to secure a home loan. Lenders generally take a long look at an applicant’s credit when processing a mortgage application. These are ways that spousal credit scores and histories may impact getting a loan.
How Marriage Can Affect Credit
Although getting married does not automatically impact your credit score, there are things couples do that result in changes. For example, opening joint credit cards or loans generally results in the usage affecting both credit histories. Late payments, excessive use of credit, bank overdraft penalties and other negatives may impact both spouses.
On the other hand, adequately managed joint accounts could help raise scores. When partners work together in a fiscally responsible fashion, that teamwork could help the couple to secure a home loan. It’s essential for married couples to keep in mind that commingling money and credit can positively or negatively affect your ability to get a loan. It’s all about how you manage money as a couple.
Securing A Loan When One Spouse Has Poor Credit
It’s important to keep in mind that credit scores are connected to only one person. Should you marry someone with a higher or lower score, yours does not necessarily change. That being said, both scores may affect the ability of a couple to secure a mortgage.
Consider a scenario in which the lender requires the income of both parties to meet the home loan requirements for repayment. In this case, both credit histories would affect your loan approval and terms.
If you apply jointly and meet the standards, the blemished credit history of one spouse could result in a higher interest rate. In these circumstances, one solution for couples has been to secure the mortgage entirely through the spouse with the best credit score. This may be the best way to proceed if there is sufficient income available from just the spouse with the higher credit score. The result may be a better rate. It’s not uncommon for couples to later refinance once both scores are high enough.
Spouses may have to jump through some hoops if one of you has a lackluster credit score. It is in your best interest to review debt-to-income ratios, credit scores and decide on your best option. There are a variety of ways spouses can successfully secure a home loan with some financial planning. Connect with your mortgage advisor today to go over all the options available to you with Pacific Residential Mortgage.
Do you have additional questions about how your credit or your spouse’s credit can affect your mortgage application? Contact us today or fill out the form below.