How to apply for a mortgage even when my partner has bad credit?

Any general questions you might have in regards to loans and finance.
Mindy
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Joined: Fri Aug 02, 2019 7:11 pm

How to apply for a mortgage even when my partner has bad credit?

Postby Mindy » Fri Aug 02, 2019 7:13 pm

We have been married for at least 4 years, but my husband was laid off from his job 2 years ago as the company closed down. During this time, he had trouble paying for making our credit card payments, which led to a blemish on his credit history.

How to apply for a mortgage even when my partner has bad credit?

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Otto Dargan
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Re: How to apply for a mortgage even when my partner has bad credit?

Postby Otto Dargan » Fri Aug 02, 2019 7:29 pm

Hello Mindy.

Thank you for reaching out to us and welcome to the forum.

This is not an uncommon situation to be in and you can apply for a home loan, even if your husband has bad credit.

Before applying for the loan, look into the credit file of you and your husband by requesting a free annual copy of a credit report from Equifax or Dun & Bradstreet. You can also make use of our credit score calculator to work out potential red flags.

If there is any incorrect information on their credit file, correct them immediately by contacting the credit reporting body as defaults, even when paid could stay in the credit file for up to 5 years.

If you had applied for a loan with major banks or lenders, then this could leave an enquiry as a record of your loan application with them.

To avoid more credit enquiries which decrease your credit score, you can contact our specialist brokers to look up your credit file to identify all the issues banks may have and carry out a full assessment to figure out which lenders would accept your situation.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan, even if your partner has bad credit.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Mindy
Posts: 3
Joined: Fri Aug 02, 2019 7:11 pm

Re: How to apply for a mortgage even when my partner has bad credit?

Postby Mindy » Fri Aug 02, 2019 7:39 pm

We just used the credit score calculator, and we're in medium risk, with a credit score of 45.5/100. Are there ways I can apply even with this score?

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Otto Dargan
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Re: How to apply for a mortgage even when my partner has bad credit?

Postby Otto Dargan » Fri Aug 02, 2019 8:04 pm

Hi Mindy,

Yes, there are ways to apply for a home loan with your partner even with medium credit score:

  • You can apply as a solo applicant provided that you can service the loan on your single income and the property title will only have your name.
  • The major caveat here is that borrowing power may be an issue here.
  • A Common Debt Reducer (CDR) is a great way for a husband and wife where only one of the parties is an applicant to improve their borrowing power. A CDR allows the use of reduced living expenses and shared debts for servicing the home loan as long as the non-borrower can evidence self-supporting income.
  • You can apply for a one borrower, two owners structure where only you can borrow on a jointly owned property. This option is only available for a few lenders.
  • You can apply with lenders that consider small defaults. Some lenders consider defaults of less than $1,000 under their standard policy. If approved, your husband would have to pay unpaid defaults at settlement.
  • You can apply with specialist lenders who can help borrowers who fall under the bank's standard lending criteria. Depending on the nature and severity of the credit listing, you may have to pay slightly higher interest rates. While the interest rates might be higher now, once your financial position is stable and free from bad credit, you will have the option torefinance from a bad credit home loan.

If none of these options works out for you, then you simply have to wait for your husband's credit listing to be cleared, which can improve your credit score. In the meantime, you could work on saving a bigger deposit.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Mindy
Posts: 3
Joined: Fri Aug 02, 2019 7:11 pm

Re: How to apply for a mortgage even when my partner has bad credit?

Postby Mindy » Fri Aug 02, 2019 8:18 pm

Saving on a bigger deposit might be a good plan while waiting for my husband's credit to clear.
How much deposit do I actually need to show? Let's say the property we are looking for is around $750,000.

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Otto Dargan
Mortgage Specialist
Posts: 7657
Joined: Sat Sep 06, 2008 5:55 pm
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Re: How to apply for a mortgage even when my partner has bad credit?

Postby Otto Dargan » Fri Aug 02, 2019 8:24 pm

Different lenders have different requirements. By increasing your deposit, it means the lenders are taking less risk in lending you money to buy the property. As a general rule of thumb, home buyers will need to show between 5% to 10% of the purchase price of the house as a deposit.

In this instance, for a property value of $750,000, you will need to have a minimum of $37,500 as a 5% deposit.

Besides the minimum deposit, you and your husband will also need to take into consideration the additional purchasing costs like stamp duty, conveyance fees, etc.

Furthermore, if need to borrow over 80% of the property value, then you will need to pay Lenders’ Mortgage Insurance, which would add to the additional costs.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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