Buying a house when one spouse has bad credit is a situation many couples face. You may be able to make the purchase, but the terms will not be as good. Credit scores are important to your lender because they indicate how responsible you are with your money. A low score means elevated risk.
- Your partner’s imperfect credit will affect you getting a mortgage.
- You may be able to get a Federal Housing Administration (FHA) loan if your spouse has poor credit.
- Even if you have high income, imperfect credit will negatively impact your loan terms.
- You can refinance if your spouse has poor credit if their scores are not too low.
Credit scores are important, but they are not the only factor banks look at when applying for a mortgage. Income, debt, and savings are important, too. You should sit down with your lender and discuss your options. You may be surprised by what they recommend.
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Will My Partner’s Bad Credit Affect Me Getting a Mortgage?
Yes, your partner’s poor credit will affect your ability to get a mortgage. Your lender wants to see both of your credit scores, but most only consider the lower partner’s credit. Here is the process for most banks:
- Your lender gets each of your scores from all three credit bureaus.
- For each of you they consider the middle score of the three bureaus.
- They use the lower score to use for qualification and determine loan terms.
Most banks follow this process. Some will average the scores. Others will weigh the scores based on income. No matter what the bank decides, they consider your partner’s poor credit. Depending on how damaged their credit is, it may affect you getting a mortgage.
Can I Buy a House Without My Wife’s Credit?
Yes, you can buy a house without your wife’s credit if you do not include her on the mortgage. However, if you want or need to include her income, then the bank will use her credit, too. Credit is only one part of your financial record that your lender looks at. Other areas include:
While credit scores are important for banks, these other areas affect your ability to get a mortgage. You need to carefully examine your financial situation and determine what strategy gets you the best terms for your loan.
Can I Get an FHA Loan if My Spouse has Bad Credit?
You may get an FHA loan if your spouse has poor credit if it is not too bad. However, if their score is below 580, they might not approve your loan. To get around this you can apply by yourself. Here are some things to consider:
- The bank still requires the non-borrowing spouse to sign an acknowledgment of the mortgage.
- The non-borrowing spouse still must submit their credit scores.
- Even if the bank does not consider the non-borrowing spouse’s credit, they still consider debt.
If you are concerned about your spouse’s credit, you should talk about it early with your lender. They want to approve you for the loan because that is how they make money. They need to weigh your default risk against your reward of closing the deal, but in the end, they will try hard to find a way to qualify you for the loan.1
What is the Minimum Credit Score for an FHA Loan?
The minimum credit score for an FHA loan depends on several factors, including down payment, debt, income, and loan limits. Most often, the FHA requires a score of at least 580 with a 3.5% down payment. Other requirements include:
- The home must be appraised by an FHA-approved appraiser.
- The house must be your primary residence.
- You must occupy the residence within 60 days (about 2 months) of closing.
- You must pay Mortgage Insurance Premium (MIP)
It is possible to get an FHA loan with a credit score as low as 500 from some (not all) banks with a higher down payment, usually 13.5%. If yourself in this position, it may be better to wait a little while and do some things to repair your credit.
Can I Get an FHA Loan if My Spouse has Bad Credit?
Yes, you can get an FHA loan if your spouse has bad credit, but it depends on how damaged their score is. If their score is below 580, you will find it difficult to find a bank to approve the loan. If your spouse has a score below 500, you must find another way to apply for the loan. In this case, you can apply for the mortgage by yourself. If that is not a good option, you must wait and work to repair their credit.2
Buying a House When One Spouse has Bad Credit, but Good Income
You can buy a house with imperfect credit, but a good income. It is not ideal, and your loan terms will not be as good. Banks see poor credit as a risk but see high income as a benefit. Therefore, these two factors offset each other to a degree.
Can I Get a Mortgage with Bad Credit but Good Income?
You can get a mortgage with poor credit but a good income if your credit is not too bad. Further, lenders do not only look at your credit scores. Here are some other factors:
- How much cash do you have for a down payment?
- Do you have a little or a lot of debt?
- Do you have any debts in collection?
If you have a high income, you can take care of some of these easily. Curtail your spending and save more. If you have debt pay it down. Take care of any debts in collections as soon as possible. These steps also help repair your credit.3
What is the Lowest Credit Score You Can Have to Buy a House?
The lowest score that most banks will consider is 580 for a conventional loan. You can get loans with a lower score if you have a large down payment and/or high income. After that, you should consider a government-backed loan like an FHA. With these, you may get a loan if your score is as low as 500, but you must put down more money and have a good income.
Can You Refinance if One Spouse has Bad Credit?
You can usually refinance if one spouse has poor credit, but it depends on how bad the score is. A refinanced loan works just like other mortgages. The bank will approve your loan more readily if you have substantial equity in the house, but the requirements are the same.
Final Thoughts on Buying a House When One Spouse has Bad Credit
Buying a house when one spouse has bad credit limits a couple’s options. Likely, they must pay a higher interest rate. If they decide to have only one spouse on the mortgage to get a better rate, then they may not get a high loan amount.
For most people, we recommend waiting and repairing damaged credit. For most couples, this is easier than they think. It does take discipline to control spending. However, that responsibility will serve you well when you have that big mortgage payment.