When two people decide to buy a house together, they have a lot to consider. Most likely, you and your spouse have discussed how you will pool your funds, divide costs, and set aside money for big purchases.
Buying a home is one of the biggest decisions people will make. It’s likely that you’ve monitored your credit score closely and taken care to avoid taking any actions that might lower it.
However, what about your partner’s credit score? Both of your credit scores will be taken into consideration if you and your partner decide to take out a joint mortgage. This guide will explain how credit scores are calculated for a joint mortgage, how they impact mortgage applications, and what to do if your spouse has poor credit.
When embarking on the exciting journey of buying a house, credit scores often take center stage. Understanding how your credit scores are combined with your co-borrower’s can be crucial for securing the best mortgage rates and terms. Let’s delve into the intricacies of credit score combination, drawing insights from reliable sources like Chase Bank.
The Credit Score Puzzle: Unraveling the Mystery
Your credit score is a numerical representation of your creditworthiness, based on your financial history and payment behavior. It plays a vital role in determining your eligibility for loans including mortgages, and the interest rates you’ll pay. When applying for a mortgage with a co-borrower your individual credit scores are combined to assess the overall creditworthiness of the application.
The Median Score: A Common Approach
It’s common for lenders to use the median of each individual’s credit scores as the “representative” score. This means they’ll calculate the middle score among all your credit scores from different bureaus (Experian, Equifax, and TransUnion) and use that as your representative score.
Combining Scores: A Tale of Two Methods
Once the representative scores are determined, lenders typically use one of two methods to combine them:
- Lowest Median Score: This method takes the lower of the two median scores as the combined score for the mortgage application. This approach can be disadvantageous if one borrower has a significantly lower credit score than the other.
- Averaging the Scores: Some lenders average the two median scores to arrive at the combined score. This method can be more favorable if the credit scores are closer together.
The Lender’s Choice: A World of Variations
It’s important to note that each lender has its own way of combining credit scores for mortgage applications. While the methods mentioned above are common, some lenders might have different approaches or consider additional factors beyond credit scores.
Optimizing Your Combined Score: A Team Effort
If you’re planning to buy a house with a co-borrower, here are some tips to optimize your combined credit score:
- Check Your Credit Reports: Regularly review your credit reports from all three bureaus to identify and address any errors or inaccuracies.
- Pay Your Bills on Time: Consistent on-time payments are crucial for maintaining a good credit score.
- Keep Your Credit Utilization Low: Aim to keep your credit card balances below 30% of your available credit limit.
- Avoid Opening New Credit Accounts: Opening new accounts can temporarily lower your credit score, so avoid doing so before applying for a mortgage.
- Consider a Credit Builder Loan: If you have limited credit history, a credit builder loan can help establish or improve your credit score.
The Bottom Line: A Collaborative Approach to Homeownership
Combining credit scores for a mortgage can be a complex process, but understanding the different methods and taking steps to optimize your credit can help you secure the best possible mortgage terms. Remember, buying a house is a team effort, and working together with your co-borrower to improve your credit scores can pave the way for a successful homeownership journey.
Take the first step and get preapproved.
These articles are for educational purposes only and provide general mortgage information. The goods, services, procedures, and lending standards outlined in these articles might not match those offered by JPMorgan Chase Bank N. A. or any of its affiliates. The opinions stated in this article do not represent JPMorgan Chase’s official policy, position, or endorsement. or its affiliates. The opinions and tactics expressed might not be suitable for everyone, and they are not meant to be personalized recommendations or advice for any one person. Information has been obtained from sources believed to be reliable, but JPMorgan Chase & Co. or its affiliates and/or subsidiaries do not warrant its completeness or accuracy. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results. Please get in touch with a Chase Home Lending Advisor to explore your options and receive more details about the goods and services that are offered.
Choose the checking account that works best for you. See our Chase Total Checking® offer for new customers. Use your debit card to make purchases and bank from virtually anywhere using a phone, tablet, or computer. There are over 15,000 ATMs and over 4,700 branches.
Find a different co-signer
Another option is to find another co-borrower. Ask a relative who has a high credit score to help you get approved for your mortgage. Every lender has different rules for co-signers, so check to make sure you can work with a co-signer.
In the short- to medium-term, getting a co-signer can help you move into your new house while giving you and your partner time to repair your credit. If your partner’s credit history and yours both improve over time, you might be able to refinance the current loan, remove the co-borrower, and add the partner with the better credit.
Do You Really Need A Credit Score To Buy A House?
FAQ
Can you combine two credit scores to buy a house?
What is a good combined credit score to buy a house?
What credit score is used when a couple buys a house?
Can I use my credit score and my husbands income to buy a house?
Do all home loans require the same credit score?
Since not all loans require the same credit score, here are a few different types of home loans and the credit score requirements for each. Conventional. For fixed-rate loans, you should have at least a 620 credit score to qualify for a conventional loan. For adjustable-rate mortgages (ARM), you’ll need at least a 640.
Can you buy a house with a low credit score?
Certain loan types even allow you to buy a house with a credit score as low as 500. It’s possible to buy a house with a wide range of credit scores, but the higher your credit score, the more likely you’ll be able to secure more favorable loan terms with your lender.
Can you buy a house with a high credit score?
It’s possible to buy a house with a wide range of credit scores, but the higher your credit score, the more likely you’ll be able to secure more favorable loan terms with your lender. If you’re buying a home with cash, you won’t need to be concerned with your credit score, as you won’t be working with a lender.
What is a good credit score to buy a house?
A favorable credit score to buy a house is typically in the high 600s and 700s. Anything higher than that is considered “exceptional”, and helps borrowers get the very best mortgage rates. Certain loan types even allow you to buy a house with a credit score as low as 500.