Qualifying For A Mortgage When One Spouse Has A Low Credit Score

There are several possible options to deal with this issue, depending upon the exact situation.

For A paper, both spouses must qualify, credit score-wise. If one spouse's credit is not up to the level that lender wants (and fannie or Freddie require) they will be unable to qualify together. The way around this is a quitclaim to the spouse who has a good credit score as sole and separate property. The catch is that then the good credit score spouse has to qualify for the loan on their own. If the other spouse is the one that makes all the money, if the good score spouse is in a profession where the needed income isn't believable for stated income (stated income is essentially gone as of this update; this was a legitimate use for stated income although the risks should be discussed), or a whole list of other possible reasons, you may have to go sub-prime, which is also essentially gone. You will not be able to qualify for the same level of property you could with two documentable incomes.

For sub-prime, the spouse who makes more money is the one that will be used as the determination, so as long as the second spouse is in the same vague general ballpark, score-wise, you can still use both incomes to qualify. If one spouse makes slightly more money but the other spouse has a much higher credit score, it was usually necessary to do the stated income with the spouse who has the better score as the sole borrower. You can't do this if one spouse is a doctor and the other works fast food, but you can if they're both in the same industry, or in industries where the incomes are roughly comparable, so long as the job titles and employment history don't render the claim unbelievable. The classic example of this working is both spouses in sales, paid on commission. In some instances, a quitclaim can still be the way to go. However, note that with the current state of the market, it is necessary to stay within what the spouse with the usable income can afford on their own. Note that there are still risks that need to be discussed, most notably to the spouse with the better credit score, but it could be done when this article was originally written. It will probably come back at some point, but it's anyone's guess as to when.

Now if you do a quitclaim, the property doesn't have to stay quitclaimed. As soon as the loan funds and records, you can quitclaim it back to husband and wife as joint tenants with rights of survivorship, or whatever you want. Quite a few spouses are understandably reluctant to give up all ownership interest, but it's a temporary measure; it doesn't have to stay that way. As soon as the loan funds and records, you get the spouse who qualified for the loan to quitclaim it back to husband and wife, or the trust, or however they want the vesting to be. The better escrow officers I work with will usually have the quitclaim back made up and sent out for signatures without even being asked (I found this out one time when my clients didn't want it quitclaimed back, and called me when they got the form in the mail. I just told them to shred it, and called the escrow office to tell them thanks but not to bother).

Caveat Emptor

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