Being a couple, if only one of you has a good credit score between you and your partner, there is little chance for you both to qualify for a mortgage. Mortgage lenders will consider both of your FICO scores in case of a joint mortgage application. So, as a couple, it is quite possible that you have to pay high-interest. For this reason, taking out a joint mortgage may become difficult for you.
Check out the options to consider if it happens with you:
1. Dispute if you have any credit report error
You must dispute errors on your credit report as soon as possible.
As per the Federal Trade Commission (FTC), 5% of US consumers (in 2012) found errors on their credit reports.
These errors may include - wrong SSN, wrong address, late payment entries, etc.
2. Provide detailed reports
You must submit all the facts and proper documents to potential lenders. A lender or a creditor also considers your income, DTI ratio and the down payment apart from your credit score while determining whether or not to approve your application. They also check out the current market value and condition of the property before giving the approval. So, if you can show the proper documents with sufficient proof of your steady income, it’ll help you to hit the bull’s eye.
3. Explain the reasons behind your low credit score
Explain the exact reasons clearly to the lender behind the low credit score of you or your partner. If you have sufficient proof that the income was temporarily down due to unemployment, bad health or other unexpected life events, a lender might consider your joint mortgage application despite the situation.
4. Try to improve the credit score
Be active and take measures to improve your credit score even before you start shopping for a mortgage or sending the loan application. It’s good for you or your partner to try hard months ahead of time rather than paying a high rate of interest or getting denied for a loan. You must remember that improving your credit score doesn’t take too long, but you still need to have the patience to make it good.
5. Send individual application to the lender
If your credit score is higher than your partner, you may try for an individual mortgage. This strategy will work only if the person, applying for the loan, has enough income to support his/her application. If the lender sees you as a competent borrower with good credit score and, enough income to meet the monthly mortgage payment, he will approve your loan application.
6. Add parents as the co-signers
If the mortgage lender considers any one of you as a non-eligible borrower, you may add your parents in the loan deed. It’s a good option for the people who face problems due to bad credit score.
Remember, if you fail to make the loan payments, your co-signers (parents) will also be liable to make them.
They are legally bound to make the monthly installments if the primary borrower (you) does not.