Mortgage  Question?
Apply mortgage sole borrower or with spouse bad credit?

Should I apply for a mortgage as a sole borrower or with with my spouse? My spouse earns a good living but has a low credit score and had a foreclosure three years ago. My credit is good and my income is from a disability pension and I want to determine what size mortgage I can afford on my own. Also, do you think the HomeReady Program would work for us?

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

To answer your question about what size mortgage you can afford on your own, I recommend that you use our Mortgage Qualification Calculator to determine what size mortgage you can afford based on your monthly gross income and debt expense figures. The amount of the mortgage you qualify for plus your down payment equals the price of home or condo you can afford. You have a high credit score and as long as your monthly disability income is permanent and not temporary you should be in a good position to qualify for a mortgage as a sole borrower.

Making your partner a co-borrower on the mortgage makes the process more complicated for several reasons. From a purely financial standpoint, your partner's income and relatively low debt should definitely help you qualify for a larger mortgage amount. His credit issues, however, may create some challenges that you would not have as a sole borrower. First, when two people apply for a mortgage as co-borrowers, lenders generally use the lower credit score of the two borrowers in the qualification process. In your case, using your partner's lower credit score may require you to pay a higher interest rate or disqualify you from certain loan programs.

Your partner's foreclosure three years ago may also create a roadblock for you. Lenders impose waiting periods following derogatory credit events such as a bankruptcy, default or foreclosure and the length of the waiting period varies depending on the type of event. For example, for a foreclosure the waiting period is seven years for a conventional mortgage, three years for an FHA loan and two years for a VA loan. The waiting periods are shorter if you experienced an extenuating circumstance such as a job loss, medical illness or divorce that contributed to the derogatory credit event. For example, if extenuating circumstances contributed to your partner's foreclosure, the waiting period is three years for a conventional mortgage, one year for an FHA loan and one-to-two years for a VA loan. We provide a comprehensive overview of the mortgage waiting periods following negative credit events on FREEandCLEAR that you should review to understand if they apply to your partner.

You also asked about the HomeReady Program. We provide a comprehensive overview of the HomeReady Program on FREEandCLEAR as well as an overview of the Pros and Cons of the HomeReady Program that you can review. My sense is that you may make too much money to be eligible for the HomeReady Program but you can review the resources on FREEandCLEAR to determine the HomeReady income limit for where you want to buy your home. If you add your partner as a co-borrower then you definitely exceed the income limit so that is something to consider. While the HomeReady Program offers advantages I think you should be able to qualify for a mortgage without it.

My ultimate recommendation is that you contact multiple lenders to understand how they would handle your unique situation. Provide your and your partner's income, debt and credit information to lenders and they can help you determine the loan amount and program that meet your objectives. You can review lenders in your area by clicking INTEREST RATES We advise you to contact at least four lenders as qualification guidelines can vary. Plus shopping multiple lenders is the best way to find the mortgage with the lowest rate and fees.

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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. More about Harry

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