Getting Preapproved With Spouse With Questionable Credit

[jonathanw84]

My wife and I are looking to purchase a house. She had some credit issues in the past that have been payed off and closed, but her FICO is still in the low 600 range. I have scores in the low 800's. Between rent, two auto loans and student loans, our DTI ratio is about 35%. Will we have any issues applying for a mortgage together?

[ShanetheMortgageMan]

It depends on...

1.  If you can qualify with just your own income

2.  If you can't, then what is on your wife's credit that is bringing it to the low 600 range?  What is the "low 600 range" to you?  600-610?  630?  640?

Rent isn't included in your DTI since it'll be replaced with the new mortgage payment.  There is a list of items at Do I qualify for a mortgage? Info that is needed. which will help others help you.

[jonathanw84]

I would rather us do it together if possible since she makes a bit more than I do (our gross income combined is about 90k). Her scores are in the 630 range. If rent is not included in DTI then our ratio is much lower than I previously stated :-)

[ShanetheMortgageMan]

With 630 scores you are probably looking at government financing - FHA most likely which requires a 3.5% down payment, or if you or your spouse happen to be a Veteran then VA would be an option and that's 0% down, or if you are looking to buy in a rural area/town then USDA Rural Housing financing may be a possibility and that is also 0% down but it has income limits you must be within & geographic restrictions where you cannot purchase homes.  If you can put down 20% then Fannie Mae & Freddie Mac conforming financing would also be an option.  But scores aren't everything, what is on her credit that is bringing her scores down is equally as important.

[jonathanw84]

The dings on her credit report are mistakes that she made in the past. She had plenty of lates and many accounts that were sent into collections. Since then, she has paid off all of her past debts and is now just waiting for the baddies to fall off one by one.

We live in Southern California so I'm thinking that an FHA may be best. Neither of us are veterans and we do not live in a rural area. I just wanted to ensure that this was something that we could do together.

Thanks for the info everyone!

[ShanetheMortgageMan]

As soon as she's had 12 months of clean credit, and if all of the debts/collections are paid, then I think her credit should be fine for FHA financing.  Getting her scores to a 640 level will open up more options... but ideally you'd want to aim for a 660 or 680 to have the easiest time in underwriting.  If you can get her scores up to a 680 then conventional financing will start to look better than FHA financing in terms of overall monthly payment.