How to Buy a House when Your Partner Has Bad Credit

 

There’s no denying that marriage can be a beautiful thing. Spending a life with a best friend and romantic partner is what many people regard as the best choice they’ve made in their lives.

At the same time, marriage isn’t without its challenges. Being on the same page about children, family, and money isn’t a direct byproduct of love. Money specifically is the number one thing that married couples fight about. And since many couples seek housing they can raise a family in, the inevitable reality sets in that there will be partners with whom we marry that will have bad credit.

In the event you’ve found yourself in this situation, there are various ways you can navigate the home-buying process.

Apply for a Mortgage or Loan in One Partner’s Name

Many financial experts will recommend that partners with disparate credit only apply for a mortgage in the ‘good credit’ partner’s name. Of course, this means that the bad-credit partner’s income won’t be factored into the mortgage, which is problematic if the partner with the good credit earns significantly less than the partner with bad credit. This dilemma occurs regularly, as evidenced in Freedom Debt Relief reviews about how households navigated debt settlement during a home-buying process.

 

Apply for a Mortgage Under Both Names

Having both incomes calculated into a mortgage offer will increase the value of the loan you’re approved for, but the bad credit score will cause you to pay more in interest.

If you need to buy a home quickly, you can pay more in interest until the bad credit rebounds and then refinance your mortgage. The caveat with this strategy is that there’s no guarantee you’ll get better terms in the future depending on the trajectory of interest rates and the economy. However, one or more incomes in the household may have risen, which would help you refinance for better terms.

Apply for a Mortgage Both Ways

There’s no harm in running both scenarios and seeing which yields more favorable terms. In most cases, a couple will be approved for a higher mortgage if they both apply because of joint incomes, but receive a worse interest rate due to the lousy credit dragging down the collective score.

Get a Co-Signer

It’s probably not what you envisioned when you first thought of buying a home together as a couple, but if the good partner’s credit and income aren’t enough to get a mortgage, you can ask someone in the family to get a co-signer.

Wait to Buy a Home Until the Bad Credit Rebounds

How much of a rush are you in to buy a house? If the notion to buy a home is more of an urge than a need, it’s most certainly in your best option to wait until the partner’s credit returns to a fair level. Even bad credit scores, stemming from missed payments or a defaulted account, can improve significantly over 12 to 18 months. Keep in mind this requires practicing good credit-building strategies.

Credit Score Isn’t the Defining Factor for Approval

Credit scores matter when applying for a mortgage, but they don’t tell the whole tale. Banks also have their own calculations and metrics to deem your reliability as a borrower. Chances are that if you have the income to warrant a specific loan, you’ll probably be approved for it even if the joint credit score isn’t ideal. You’ll pay for it in interest, but for some, that’s a small price for moving into a place they can finally call “home.”