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Improving Your Credit Rating
Money Management

Does your wife have to be on your mortgage?


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January 08, 2008 1:49PM

No your spouse does not have to be on your mortgage but depending on the state, they must sign away their martial rights to the property because under the law, you are one! If you are looking for more info about the Mortgage process and credit check out The Credit Bible by Phil Turner. Below are some options for you. Option one: Buy the house together as co-owners and co-borrowers. In this situation, your bad credit will result in a bad credit rating for the transaction, and a corresponding high interest rate. This is exactly what you are looking to avoid. Option two: Have "good-credit" buy the house alone, leaving "bad-credit" out of the deal. But then the mortgage would be limited to the amount that the income of "good-credit" can support. This means that you might not be able to purchase the house that you want and that would be affordable if both incomes were taken into account. Option three: Have "good credit" buy the house using stated income "no-income verification" mortgage. Then the mortgage amount would not be limited by the income of "good-credit" because the lender will not consider income in underwriting the loan. However, qualifying for a no-income verification loan requires that you put up a large down payment - probably 25 or 30% of the property value. Option four: Have a third party with good credit and income replace "bad-credit" as the co-borrower. Usually only a parent would be willing to play this role. Which way you go depends in large part on how much you want to spend on your house. The table below provides estimates of the highest sale price you can afford at different down payment requirements, income, and available cash. It indicates that the no-income verification option would limit you to a house in the $120,000 to $140,000 range because of the large down payment requirement. On the other hand, the income of "good-credit" alone, along with the cash from both of you, would allow a $340,000 house at 5% down. That looks like the way to go unless you want to spend more, in which case you must find another co-borrower. Again Source: The Credit Bible by Phil Turner.