Joint Mortgage When One Partner Has Bad Credit: A Practical Guide

When you and a partner are looking to buy a home together, it’s natural that you’d also consider signing a mortgage together. And in some cases, applying for a mortgage jointly could work to your benefit.

One factor mortgage lenders consider when approving loan candidates is income. If both you and your partner work, your combined income may make it easier to get approved for a mortgage than applying with a single income.

Another factor mortgage lenders consider when deciding who qualifies for a home loan is your credit history and score. If you have a great credit score but your partner has bad credit, applying for a joint mortgage could lead to a denial.

Here, we’ll discuss how to approach a joint mortgage when one partner has bad credit and how to potentially overcome that hurdle.

What To Know About Joint Mortgage Loan Requirements

A joint mortgage is a home loan that two or more people apply for and sign together. If you and a partner get a joint mortgage, it means you’re both legally responsible for making payments on that loan every month.

Many partners choose to apply for a joint mortgage because it allows them to combine their incomes. That could help them qualify for a larger loan amount.

But income isn’t the only thing mortgage lenders look at. When you apply for a mortgage, either on your own or jointly with another person, lenders will look at your:

If any of these factors raise a red flag, it could be a barrier to getting approved for a mortgage. For example, if you have good credit and very little debt, but you don’t have proof of stable employment, you may be denied a mortgage. Similarly, if you have a high income but significant debt and poor credit, you may not be approved.

How One Partner’s Poor Credit Could Affect Mortgage Approval

You might assume that when you apply for a joint mortgage, lenders take the average of your credit score and your partner’s score to determine whether you qualify to borrow. In reality, lenders typically focus on the lowest credit score on a joint mortgage application.

Joint mortgage loan requirements can vary by lender. Generally, lenders require a minimum credit score of 620 to qualify for a conventional mortgage; however, some lenders may require a higher minimum credit score.

If you have a 720 credit score but your partner has a credit score of 600, your lender isn’t necessarily going to take the average of those two numbers (660) and approve your loan application. Instead, you may not qualify for the loan because your partner’s score is below the typical minimum of 620.

Even if your partner’s poor credit meets a lender’s minimum guidelines for a joint mortgage approval, their lower score might result in a higher interest rate on the loan.

Mortgage lenders tend to offer better interest rates to borrowers with good credit. Let’s say you have a credit score of 760 and your partner has a 620. Their score may be just enough to get you approved for a joint mortgage. But in that case, the interest rate on your loan may reflect your partner’s lower middle score, leaving you with higher monthly payments.

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How to Handle A Joint Mortgage When One Partner Has Poor Credit

If you and your partner want to buy a home together, but one of you has poor credit, here are some options to consider.

Have Only The Partner With Good Credit Apply

If your credit score is high enough to qualify for a mortgage but your partner’s isn’t, you could decide to put only your name on the application. This way, lenders will look solely at your credit and finances when deciding whether to approve the loan.

The benefit of going this route is that you may be more likely to qualify for a mortgage and secure a competitive interest rate. And you should know that your partner can still be on the deed to the home and co-own it, even if they aren’t on the mortgage. However, this also means that legally, you’ll be the only one responsible for repaying the mortgage, not your partner.

If your partner has poor credit because they don’t do a great job of managing their money, you may not want to sign a mortgage on your own. Once you have that loan, if your partner stops contributing toward it, it’s your credit score, not theirs, that will be on the line if you’re unable to keep up with payments. Also, you may not qualify for the loan amount you want if your lender is considering only one income.

Additionally, keep in mind that in community property states, one spouse can apply for a mortgage alone, but lenders may still consider the other spouse’s debts and credit score when they review the application.

Have The Partner With Poor Credit Improve Their Score Before Applying

If you don’t need to buy a home right away, another option is to have the person with bad credit work on improving their score. Ways to boost a credit score include:

Look At Mortgages With Lower Credit Score Requirements

If you’d like to sign a joint mortgage but one partner has bad credit, you could look at loan programs with lower credit score requirements. FHA loans, for example, require a minimum credit score of 580 if you’re able to make a 3.5% down payment. However, if you can make a down payment of 10% or more, you may be approved with a credit score as low as 500.

You should also know that VA loans do not have a minimum credit score requirement. Rather, each VA lender sets its own rules regarding credit scores. However, to qualify for a VA loan, you need to be a member or veteran of the U.S. military or the surviving spouse of a military veteran.

Offer To Make A Larger Down Payment

In some cases, a lender may be willing to accept a poor credit score and approve a joint mortgage if you’re able to make a larger down payment. Lenders tend to see a larger down payment as a sign of financial stability. And if you’re borrowing less money, your lender is taking on less risk. However, there’s no guarantee that a larger down payment will be enough to make up for poor credit.

Consider Using A Co-Signer For A Mortgage

If your partner’s credit is too poor for you to qualify jointly – and you don’t earn enough to qualify on your own – you may be able to use a different co-signer for your mortgage loan. For example, if your partner’s credit needs serious work but your joint income is enough to cover mortgage payments, you may want to ask a parent or sibling to co-sign your loan instead.

That said, anyone who co-signs your mortgage will be legally obligated to make payments on that loan. However, a co-signer is not a co-borrower.

A co-borrower is on both the mortgage and a home’s deed, giving them shared ownership. A co-signer takes on risk without the benefit of co-ownership. A co-signer will also need to understand the risk they’re taking on.

Write A Letter Of Explanation If There’s A Reason For One Partner’s Bad Credit

Sometimes, a temporary financial hardship can damage a credit score. It may be that your partner’s credit score is low because their finances were drained in a divorce, and they’re in the process of recovering. Or, it may be that an illness or injury kept them out of work for a while, causing them to fall behind on bills or borrow more to stay afloat.

If the reasons behind the poor credit score no longer apply, it could be worthwhile to include a letter of explanation with your joint mortgage application. If a lender understands that the poor credit score in question resulted from a temporary situation that no longer exists, they may be willing to work with you.

The Bottom Line: Getting A Joint Mortgage When One Partner Has Bad Credit Is Possible

Having one partner with bad credit isn’t necessarily a deal breaker when it comes to getting a mortgage. It may, however, be a barrier to getting a joint mortgage. If you want both of your names on your mortgage, you may need to take steps such as having the partner with poor credit improve their credit score before applying or consider alternatives like an FHA loan with lower credit score requirements.

That said, sometimes people have bad credit for a reason. If your partner has poor credit and doesn’t seem to be making an effort to improve their financial picture, signing a mortgage jointly could lead to negative financial consequences. It’s essential to get on the same page and make sure you’re both in a healthy financial place before taking the leap into homeownership and committing to a mortgage together.

If you’re considering a joint mortgage, explore lenders and rates today.

Maurie Backman

Maurie Backman has more than a decade of experience covering personal finance topics that include mortgages, loans, retirement, Social Security, and investing. Prior to becoming a full-time writer, she worked in the financial industry as well as in product design and marketing. Maurie holds a bachelor's degree from Binghamton University, where she studied creative writing and finance. She was happy to combine her two areas of study into a career that allows her to educate consumers on a host of financial topics.

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