It is not at all tough to obtain a mortgage, in case one of the spouses has bad credit. If you are the one who have good credit, you can opt to obtain the home loan under your name. Avoid taking out a mortgage under the joint names of you and your spouse. If you have a clear understanding of the actual mortgage lending process, it is never going to seem as too tough for you to handle the issue. However, if you can’t apply alone because you do not have enough income, you may have to try out other options.
When good credit marries bad
What happens when a person with good credit marries a person with bad credit? The person with bad credit may learn a lot from his/her spouse who has good credit. This can help the person with bad credit to improve his/her credit. Or else, such financial inequality is going to weigh heavy on the relation. Yes, there is high divorce rate in the USA and one of the main reasons for the divorce is, financial differences. So, financial instability can put your marriage on the rocks. However, what about obtaining new credit?
If you are planning to buy a home and that too on a joint basis, the person with bad credit can be on the deed, but not on the mortgage. So, you cannot apply for a mortgage on a joint basis, in case your spouse has bad credit. For, it may not be possible to qualify for a mortgage, if you have bad credit. When you apply for a new loan, the very first thing that the lender tries to find out is your credit rating. So, if you are applying on a joint bases, both of your credit ratings would be considered by the lender. If the lender is dissatisfied with what he sees, your loan application is going to be rejected.
So, you will have to make it a point that if you have good credit and if your spouse does not, (or if your spouse has good credit and if you do not) you will have to apply under a single name. However, in that case the person applying for the loan will be required to have a good credit rating and a good income too. Furthermore, the one applying for the loan would also be required to have an extremely good DTI or debt to income ratio. That may help you in getting a really good rate of interest, with regards to the home loan.
Still, it may not always be possible to obtain a home loan even if you have a good credit score. If you do not have a good DTI, it may not be possible to obtain a good offer. Furthermore, if you do not have a good income, in that case too, obtaining a home loan is going to prove to be hard.
What if you do not have enough income? You would have to opt for the bad credit mortgage loans, as these have mainly been designed for those who have bad credit. There are some lenders who offer loans to those who have bad credit. However, yes the interest rates on such bad credit mortgage loans are going to be high enough. In that case, you would be required to decide if it would at all be possible to manage the mortgage payments. Or else, you may end up lose the home to the lender foreclosure process.