It’s quite common for one spouse or partner to have a good credit score and the other to have a bad credit rating when they’re planning to apply for a mortgage. If this is the case you may want to speak with a mortgage broker who has experience with this type of situation to discuss your options.
Do You Apply Together or Separate?
You may decide to apply for the mortgage in the name of the person with the good credit score as this should result in lower interest rates. However, since the income of the other person won’t be considered you may not be able to borrow as much money as you had hoped. You will still be able to have both people listed on the home’s title, but just one person will be named on the mortgage.
Some lending institutions may only concern themselves with the credit score of the main income earner and if this is the person with the good credit score then you should still get a good interest rate. This is because the income of both people will be considered in the mortgage application. But since there are different scenarios when it comes partners with different credit ratings it’s recommended you speak with a professional mortgage broker to let them do the legwork for you.
If you purchase the home as co-borrowers and co-owners you will find some lending institutions will categorize you as a having bad credit and the interest rates will typically be higher. You could also have a family member with good credit replace the person with the bad credit when applying for a mortgage, but this may not be the best solution since doing business with family can lead to bad results.
The only time a spouse’s bad credit rating will affect their partner’s score will be if they have joint accounts and joint debts. If the account is in one name only then it won’t affect the other person’s rating. Remember, each person has an individual credit score rather than a joint score. If you want to use your combined income when applying for a mortgage though, the lender will generally want to see both of the individual credit reports.
If you and your partner or spouse do have joint accounts such as credit cards etc, then both of the individual’s credit scores will be affected by them. As an individual one of the partners may qualify for a good interest rate, but as a couple you may have a lower credit rating and be faced with a higher mortgage rate. This is why it’s important to pay bills on time and keep credit card balances to a reasonable level. Also, you should only apply for credit or loans when absolutely necessary.
Getting Approved With Less Than Perfect Credit
You’ll still be able to obtain a mortgage when one person has bad credit, but it could be a little more difficult or you may end up paying more interest than you would like. You may also have to come up with a bigger down payment or seek out a private mortgage lender. However, since a mortgage broker is familiar with the rules and regulations and knows the mortgage business inside out they can help simplify complicated matters and come up with the best solution for your specific needs.
Have a question about getting approved for a mortgage with less than stellar credit? We specialize in all types of credit histories and lifestyle situations and can get you approved for a mortgage regardless of your circumstances. Mortgage Meister is located in Toronto, Canada, contact us today to learn more.