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Do Credit Cards Your Name Only Count for Joint Mortgage?

I have two credit card accounts in my name that my spouse is not aware of. Will this hurt our ability to qualify for a mortgage? Should I pay-off of the accounts before we apply for the mortgage?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

If you apply for a mortgage jointly with your spouse as co-borrowers, the credit card accounts should appear on your joint credit report, even though the accounts are only in your name. If for some reason the accounts do not appear on your credit report, you are required to disclose all loans and debts on the mortgage application that you and your spouse submit to the lender, including both joint and individual accounts.

The monthly payments for these credit card accounts is included in the debt-to-income ratio that lenders use to determine what size mortgage you and your spouse qualify for. In short, the higher your monthly debt expense, the lower the mortgage amount you can afford.

So depending on the monthly payments associated with your individual credit card accounts relative to how much money you and your spouse earn, the accounts may reduce the loan you qualify for.

Use ourTWO PERSON MORTGAGE QUALIFICATION CALCULATORto determine what size mortgage you can afford based on your monthly gross income and debt expense

If you are right on the border of being able to afford the mortgage you want, the credit card accounts could be a significant issue. If you and your spouse earn sufficient monthly gross income, then the extra monthly debt expense may be less of a factor, depending on your target mortgage amount.

If you completely payoff and close the credit card accounts that are in your name only before you apply for a mortgage, you are not required to disclose any information about the accounts on your mortgage application. The accounts still appear on your joint credit report, however, even if they are closed.

Additionally, it can take several months for account changes to be reflected on your credit report, and potentially your improve credit score. A higher credit score may enable you to qualify for better loan terms, including a lower mortgage rate and closing costs.

This is why we recommend that you payoff and close your accounts as soon as possible before you apply for a mortgage. When it comes to qualifying for a mortgage, the more up-to-date your credit report, the better.

Please note that when two people apply for a mortgage as co-borrowers, the lender uses the lower score between the two applicants to determine your loan terms. So if paying off your credit cards increases your credit score, both you and your spouse may benefit from better mortgage terms.

Perhaps most important, if you payoff your accounts, the monthly payment is not included in your debt-to-income ratio, which should increase the mortgage amount you and your spouse qualify for.

To summarize, you are required to disclose all debt accounts, both individual and join accounts, when you apply for a mortgage and the monthly debt payments for those accounts impact what size loan you can afford. Paying off the accounts can help you qualify for a mortgage by reducing your monthly debt expense. Although the accounts remain on your credit report after they are closed, you should be able to qualify for a larger mortgage and potentially improve your loan terms.

Sources

Credit Score for Mortgage: https://www.fanniemae.com/content/guide/selling/b3/5.1/01.html

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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