When Applying for a Home Loan, Does Your Spouse’s Credit Matter?

If you’re applying for a home loan, you may assume — as most borrowers do — that both spouses automatically go on the loan.

When Applying for a Home Loan, Does Your Spouse’s Credit Matter?

But what if your spouse isn’t credit-worthy? Will that reduce your chances of getting approved, or worse, lead to a denial?

Can You Get a Home Loan if Your Spouse Has Bad Credit?

Although most states in the western U.S. recognize community property laws, Utah is not one of those states.

This means that, if your spouse has bad credit (or no credit), excessive debts, collections or judgments, you have the option of applying for a home loan individually. For many potential borrowers, this is the only way to get a mortgage approval.

If you choose to apply jointly, you run the risk of being denied based on how your spouse’s unfavorable history may affect your overall creditworthiness.

How Does Each Spouse’s Credit Score Contribute to Mortgage Approval?

In community property states (which include Idaho, Nevada, Arizona and California), both FHA and VA loans require the consideration of both spouses’ debt. So if your spouse has an abundance of debt, it can skew your debt-to-income ratio and potentially prevent you from getting a home loan approval under those programs.

In Utah, however, you have the option of applying individually or as a married couple, even for VA and FHA home loans.

If you elect to apply jointly for a mortgage, the lender will consider the debts, income and credit history of both applicants and calculate your ratios accordingly. Neither spouse’s data is weighted more heavily than the other.

What Happens If You Apply for a Mortgage Without Your Spouse?

If you are a resident of Utah, you can legally apply for a home loan without your spouse. You can also get a loan approval to purchase a home on your own, even if you are married.

Bear in mind, however, that the underwriter will only be able to consider your income when determining how much you can borrow. If you want your spouse’s income to be considered, their debts and credit history will also come into play.

The outcome may be a lower borrowing limit than you otherwise would have, but you can still buy a home — which you might not otherwise accomplish if your spouse has a negative credit profile.

In most cases, you will be unable to add your spouse to the property’s deed without violating the terms of your loan agreement. Consequently, you must consider the legal implications of applying for a mortgage alone. Talk to an attorney before you make any decisions that could affect your future and that of your husband or wife.

For a personalized answer to your questions, contact Intercap Lending and speak to one of our knowledgeable lending professionals. We help clients in Orem and throughout northern Utah with all their lending needs, including mortgages, refinances, construction loans and more. Contact us today to learn more about the pros and cons of applying for a home loan with your spouse.