Q: I found an affordable house in South Carolina, but my husband’s credit scores are not up to par. What can we do?
A: There’s an organ in the human brain called the reticular activator. This is the place in your brain that causes pregnant women to suddenly notice scores of baby bumps everywhere. Buy a new car, and within 24 hours after driving it off the lot, you’ll see more cars of the same make and model as you now drive than you have ever seen in your whole life combined.
So, it might just be that my reticular activator is on Valentine’s Day mode, but as the day we’ve set aside to celebrate love draws near, I’m receiving more and more questions from readers about challenges in buying homes and qualifying for a mortgage with their mates — husbands, boyfriends and girlfriends. And yours is one of the more common ones: One partner’s income, job history or credit doesn’t pass muster. What next?
First things first: Don’t be concerned that I’m answering this question in the context of "Home Sale Hindsight." I’m not going to say, "In hindsight, you should have picked a partner with better credit!" (Please forgive the bad joke — I couldn’t help myself.) What I am going to call out as your error, which glares with crystal clarity, is the sequence in which you undertook your homebuying process.
The proper order is to vet your own credit and loan qualifications (and those of any other co-buyers/co-borrowers), get preapproved for your home loan, and then house hunt and track down your home. This allows you the opportunity to solve problems before they interfere with your ability to get a home you’re attached to, and it also empowers you to get your dream home when you do find it.
So, here’s the deal: What you can do right now, if you’re dead set on this particular home, is triage.
First, check with your mortgage pro to see if there are any relatively quick fixes she can recommend to boost your hubby’s credit score to the required level. If that’s not possible, ask her to determine whether you might be able to qualify to buy the home on your own.
If it’s that affordable, and depending on the state of your own income, assets and credit, it may be possible. If not, talk with your mortgage pro about who among your family members might be a suitable non-occupant co-borrower (formerly known as a co-signer).
Co-borrowers have to meet certain income, asset and credit requirements, too, but many a parent, grandparent or generous aunt has been known to offer either cash or put their own signature to the home loan of a couple of relatives just starting out — especially now, to help them take advantage of today’s amazing affordability.
Talk with your advisory team, including a real estate attorney, about how your husband’s interests in the home should be documented. For example, many couples in your situation buy the home using whatever financing works, then add the nonborrowing spouse to the home’s title at or following closing.
Just be forewarned: If you add your husband’s name to title, but he is not a borrower on the loan, he will acquire all of the benefits of homeownership and none of the legal liabilities to pay the home loan, if anything were to happen to your relationship.
However, my best advice to you is to take a step back. Home prices don’t look to be skyrocketing anytime soon; as much as you like this house, there are a whole lot of fish in this housing sea, and will be for some time to come. The better strategy is to walk away from this particular home and follow your mortgage broker’s suggestions for rehabbing your husband’s credit.
This will allow you to be save more money, pay more debt down and generally make a more careful, well-planned home purchase. It will also avoid the relationship issues that can arise when you ask a relative to co-sign, and/or when you buy the home on your own, without your husband participating in the loan.