 When
his credit's good, hers isn't
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 Dear
Dr. Don,
My wife and I have been married for two years. We are about to start
the house-buying process. Due to some issues in a previous marriage,
my wife's credit report is less than desirable. Does her credit
score have to be considered when applying for a mortgage? Or can
my score be considered while still including her name on the mortgage?
Thanks,
-- Jeff Jerry-Rigg
 Dear
Jeff,
If you want her income to count toward qualifying for the mortgage,
then her credit score is considered in the loan origination process.
If you don't need her income to qualify for the loan, then putting
her on the deed and not the note gives her an interest in the property.
The lender may have some say in whether it will allow your wife
to be on the deed but not on the note.
This assumes that you don't live in a community
property state, where most loan obligations taken on within
the marriage are considered joint obligations. Nine states
-- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas,
Washington and Wisconsin -- are community property states. In those
states, community property includes real estate, tangible assets
and the earnings of both spouses acquired during the marriage. Assets
acquired by gift or inheritance, or assets owned before the marriage,
are not community property.
Anecdotally, I've been told that listing the spouse
with good credit first on the application helps. Another possible
solution is to find another co-signer, such as a parent, with
good credit and a good income to co-sign the loan. (The parent
may want to be on the deed, too, and that's a whole other kettle
of fish.) There's a real level of trust on the part of the
co-signer, and a decision the co-signer shouldn't take lightly since
he or she will be on the hook to repay the loan if you can't, and
any missed or late payments will hurt the co-signer's credit score
as well as yours. The FTC Facts for Consumers guide, "Cosigning
a Loan," chronicles these issues.
Finally, a no-income verification mortgage, with you
as the borrower, takes away some of the limitations surrounding
not using her income to help you qualify for the loan. You'll
pay up a little bit on the interest rate, and these loans typically
require a larger down payment than conventional financing, but it
is something to consider.
To ask a question of Dr. Don, go to the "Ask
the Experts" page and select one of these topics: "financing
a home," "saving & investing" or "money."
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