-
Can I use my spouses income on an FHA loan even though her credit is bad
Can I use my spouses income on an FHA loan even though her credit is bad?
-
1 Reply
-
Certainly, you can use your wife’s revenue to apply for an FHA loan despite her negative credit ratings. However, here are some important points:
Non-Borrowing Spouse:
If your wife has a very poor credit history, you have the option of listing her as a non-borrowing spouse. This means that her income may be considered when qualifying for the loan. Her credit will not be considered during the approval process. Instead, her debts will be included in calculating the debt-to-income (DTI) ratio.
Joint Application:
If you opt to apply jointly, both your credit scores will be assessed. Usually, the lender considers the lower score between the two. This might affect whether you qualify or even the interest rate.
Community Property States:
In case you reside within a community property state, regardless of whether she has taken out any loans. They will still be factored into DTI calculation. This is because such places treat all debts incurred by one spouse as joint obligations potentially impacting qualification. But having said so, it’s worth mentioning that using her income could help improve your DTI ratio.
FHA Requirements:
These loans are known for being more lenient towards low credit ratings. Therefore, even if your partner does not have good scores, there is still a chance of eligibility, provided other compensating factors exist. For example, a larger down payment or higher earnings exist.
Strategies:
Here are a couple of strategies you can consider
Non-Borrowing Spouse: To avoid affecting the loan with their bad score, thus only benefiting from their income,
Credit Improvement: Try enhancing their ratings before applying to increase the chances of giving better terms.
To conclude, with an FHA loan. Even if my wife has terrible credits, I could use her money to apply. But I must decide whether she should become a borrower or act as a non-borrowing spouse. You should consult an authorized FHA lender for guidance based on your specific circumstances.