It’s always a bit awkward. You’ve just pulled credit on the soon to be newly-wed and her credit is 720+ but he’d never qualify! They know they’re a match made in heaven but for some reason their credit just doesn’t jive. Most people do not think about credit scores when they’re looking for potential matches. Even though this score can drastically determine the lifestyle and living standard they will enjoy. Of course dad’s who are Loan Officers do think about credit scores of their daughters’ potential mates, as the dad in the movie “Guess Who” does.
Why is this an issue you ask? Well if the scores are dramatically different as in this example it can really impact where they end up living for the first few years of their marriage. In most loan programs we look at the lower of the two scores. So, no matter how good she’s been with her credit and debt management he has been equally on the other side. This means we have to go with the lower denominator.Now what?
Then the questions start. Can he be on the loan? Can we use his income? Can we use his assets? All of these questions are important because it will determine the type of loan the can qualify for and ultimately the type of home they will live in. Expectations are high when you’re about to get married.
Then the questions start. Can he be on the loan? Can we use his income? Can we use his assets? All of these questions are important because it will determine the type of loan the can qualify for and ultimately the type of home they will live in. Expectations are high when you’re about to get married.
Some basics
If you can’t use the credit score then you can’t use the income of that person either. Same rule applies for assets. This mean she will now have to qualify for the entire loan by her self. This may not be possible since they were counting on both their incomes to make the payment.
If you can’t use the credit score then you can’t use the income of that person either. Same rule applies for assets. This mean she will now have to qualify for the entire loan by her self. This may not be possible since they were counting on both their incomes to make the payment.
Solution
It used to be that if she had sufficiently good credit we could do a low documentation loan with just her on the paper and get 100% financing. Now with lenders severely restricting the use of low documentation loan as well as LTV we have to be more creative. The other option would be to go sub-prime where LTV and income can be flexible for those with higher credit scores. However, she may not like this since she’s being penalized for something she didn’t do.
It used to be that if she had sufficiently good credit we could do a low documentation loan with just her on the paper and get 100% financing. Now with lenders severely restricting the use of low documentation loan as well as LTV we have to be more creative. The other option would be to go sub-prime where LTV and income can be flexible for those with higher credit scores. However, she may not like this since she’s being penalized for something she didn’t do.
Credit and Debt Management
I suggest potential borrowers in this kind of situation to take a long hard look at both their credit and debt management. The better long term solution is for him to work on improving his credit score and both of them to come to an agreement on how to best manage debt. This way they can work on one of the most difficult issues in marriage BEFORE they get married. This is important as the cartoon above shows!
I suggest potential borrowers in this kind of situation to take a long hard look at both their credit and debt management. The better long term solution is for him to work on improving his credit score and both of them to come to an agreement on how to best manage debt. This way they can work on one of the most difficult issues in marriage BEFORE they get married. This is important as the cartoon above shows!
Usually if they follow my advice we can do something for them within 6-8 months. However the bigger gain is that in the process they will have discussed an aspect of life that can be very important to their long term marital health.