Dear Dr. Don,

We have about 60 percent equity in our home. We both have credit scores above 700 and both have good incomes. We recently tried to refinance our home mortgage loan at a lower interest rate but, because I filed for bankruptcy three years ago (with the discharge completed two years ago), the lender wasn’t willing to approve a loan with me as a co-borrower. (My spouse was not involved in the bankruptcy.)

We are being told that my spouse can qualify for the loan on his own based on his credit score and income. The lender suggested we leave my name on the deed and have my spouse get life insurance on the loan so it will be paid off if he should die while the loan is outstanding. With the mortgage paid by the life insurance proceeds, the home would be mine, since my name is on the deed. But why can’t we get a loan together when we have so much equity in our home and have been here for 19 years?

— W.L. Win-Loss

Dear W.L.,

It’s a little surprising that the bankruptcy is still hurting you as a co-borrower even though both of you have credit scores over 700. My best guess is that the lender’s underwriting standards, which can go beyond the credit score, include aspects of your credit history, and the recent bankruptcy knocks you out of the box.

I’m also not quite sure why the lender is pushing mortgage life insurance. If insurance is important to you, you’re likely to do better with a straight term life insurance policy versus the mortgage life insurance product.

Time heals all wounds, and that’s especially true with credit scores. Look at yours. Three years after filing for bankruptcy and two years after the bankruptcy court’s discharge of your bankruptcy debts, you’ve got a credit score in the 700s. That’s better than 42 percent of Americans who have a credit score.

You no doubt can get a loan together. That’s not your goal. Your goal is to refinance to save money. To accomplish that goal, you have to meet the lender’s underwriting standards to get a low rate. Three years after a bankruptcy, even with good credit, you aren’t going to get a lender’s best rate. Stop lamenting that you can’t get joint credit and make the decision that’s best for you as a couple.

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