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Can You Use Spouse's Income to Qualify for HomeReady?

Can you use your spouse’s income to qualify for the HomeReady Mortgage Program?

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

There are two ways to use your spouse’s income to qualify for a HomeReady mortgage:

as a co-borrower, or 

as non-borrower household member

We explain the difference between the two approaches below so you can understand the best way to qualify for the HomeReady mortgage program based on your individual circumstances.

If you want to include your spouse’s income when you apply for the mortgage then he or she is required to be a co-borrower on the loan application. In this scenario, your spouse’s monthly gross income and debt payments are added to your income and debt to determine the mortgage you qualify for. If your spouse earns a good income and has relatively low debt expense, then the two of you should qualify for a higher mortgage amount than you could qualify for on your own as a sole borrower.

Use ourTWO PERSON MORTGAGE QUALIFICATION CALCULATORto determine the loan amount two people can afford

It is important to highlight that the HomeReady program applies borrower income limits.  To be eligible, applicants cannot make more than 80% of the area median income (AMI) where the property is located.  If you and your spouse apply for the mortgage as co-borrowers then both of your incomes count toward the income limit.  If you make too much money on a combined basis, you may exceed the income limit and not qualify for the program.

Another consideration to your spouse being a co-borrower is that lenders factor in both borrowers' credit reports and scores when you apply for a mortgage.  So  if your spouse has a low credit score or a derogatory credit event on his or her credit report, you may not be able to qualify for the mortgage or you may be required to wait before you apply.

For example, when two people apply for a mortgage as co-borrowers, the lender uses the lower score among the applicants to determine your ability to qualify for the loan and to set your mortgage terms including your interest rate. For example, if your credit score is 720 and your spouse’s score is 630, the lender uses 630 to evaluate your mortgage application.

If your spouse’s score is too low, you may not be eligible for the HomeReady Program as co-applicants, even if your personal score exceeds program guidelines. The minimum credit score required to qualify for a HomeReady mortgage is 620 so if your spouse’s score is above this threshold, the two of you should be able to apply for the program together.  If your spouse's score is below 620, then you may not be able to qualify for the mortgage, at least not as co-borrowers.

Review our HomeReady Mortgage Guide 

Please note that borrowers with lower credit scores usually pay a higher mortgage rate which increases your monthly payment. So although you may be able to qualify for a higher mortgage amount when you apply as co-borrowers, your mortgage may cost more.

The HomeReady program is provided by traditional lenders including banks, mortgage brokers and credit unions.  We recommend that you contact multiple lenders in the table below to understand program availability and to compare loan terms including mortgage rates and fees.  Shopping lenders is also the best way to save money on your mortgage.

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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.

Additionally, lenders apply waiting periods following a negative credit event such as a bankruptcy, short sale, default or foreclosure before you can apply for a mortgage.  So if your spouse has experienced a credit challenge in the past, he or she may not be able to apply for a mortgage right away.

For example, the waiting period following a Chapter 7 Bankruptcy is four years for a conventional loan such as a HomeReady mortgage. The waiting period following a Chapter 13 Bankruptcy is only two years.  There are different waiting periods following a short sale, default or foreclosure, which requires the longest wait -- seven years for a conventional mortgage.

The waiting periods are shorter if you experienced an extenuating circumstance such as a job loss, medical illness or divorce that contributed to the negative credit event. The waiting period for both a Chapter 7 Bankruptcy and a Chapter 13 Bankruptcy is two years if extenuating circumstances led to the bankruptcy. 

Review Waiting Periods Following Negative Credit Events

So if your spouse has a negative credit event on his or her record, depending on the type of event, when it occurred and if extenuating circumstances apply, he or she may not be eligible to qualify for the HomeReady Program as a co-borrower. If the applicable waiting period has passed and your spouse is eligible to apply, make sure that his or her credit score meets program guidelines.

If your spouse’s credit score does not meet the minimum credit score requirement or is stuck in a waiting period following a derogatory credit event, then your other option is for you to apply for the mortgage as a sole borrower and have your spouse be a non-borrower household member, which is a unique feature of the HomeReady program. In this case, your spouse’s income is not added to yours but rather used as a supporting factor for your application.

Although you apply for the mortgage on your own and your spouse is not a co-borrower, his or her income can be helpful if you are on the border to get approved. In short, a non-borrower household member may be able to provide a helpful nudge for your application.

We should emphasize that if you apply for the mortgage as a sole applicant then you are required to qualify for the loan solely based on your income, debt expense, credit score, employment history and other factors. This may mean that you qualify for a smaller mortgage because only one person’s income is considered instead of two.

To summarize, there are multiple ways a spouse can help you qualify for a HomeReady mortgage, depending on your individual situation.  In some case it makes sense for spouses to apply for the program as co-borrowers while in other situations it makes more sense for one spouse to apply as a sole borrower with the other spouse supporting the mortgage application as a non-borrower household member.  We recommend that you and your spouse review your monthly gross income, debt, credit score and credit history to determine the approach that best meets your needs.

You can also use the FREEandCLEAR Lender Directory to search for 25 loan programs. For example, you can search for top-rated lenders in your state that offer the HomeReady mortgage program.

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Sources

HomeReady Program Guidelines: https://www.fanniemae.com/content/fact_sheet/homeready-quick-start-guide

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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

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