Credit Card Debt and Low Credit Score Affect The Chance of Applying for A Mortgage Loans and FHA

At ABLEnding we are often asked questions about a spouse’s credit card debt as it relates to qualifying for an FHA mortgage in the state of California. Before assuming that a high credit utilization or tens of thousands of credit card debt will disqualify you for an FHA home loan anywhere in California it is important to read the official FHA documentation. Below you will find this information:

The lender must not consider the credit history of a non-borrowing spouse. The non-borrowing spouse’s credit history is not considered a reason to deny a mortgage application. If the borrower resides in a community property state or the property being insured is located in a community property state, debts of the non-borrowing spouse must be included in the borrower’s qualifying ratios, except for obligations specifically excluded by state law. The lender must:

• verify and document the debt of the non-borrowing spouse.
• make a note in the file referencing the specific state law that justifies the exclusion of any debt from consideration.
• obtain a credit report for the non-borrowing spouse in order to determine the debts that must be included in the liabilities. The credit report for the non-borrowing spouse is for the purpose of establishing debt only, and is not submitted to TOTAL Mortgage Scorecard for the purpose of credit evaluation. The credit report for the non-borrowing spouse may be traditional or non-traditional.

For additional information see Handbook 4000.1 II.A.4.b.iv.(F); II.A.5.b.i, II.A.5.a.iv.(E) available at

http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh

After reading through this you can clearly see there are not as many concerns about a spouse’s credit card, student loan or car loan debt as many may think. Feel free to call ABLEnding today at 866-260-2253 to discuss qualifying for a California FHA home loan today. We will do our best to help you get the lowest monthly mortgage payment while also qualifying for the home of your dreams.

Even if your spouse has a credit score of 620 or lower you should not be overly concerned about qualifying for an FHA home mortgage if you have a good credit score with a low debt to income ratio. If you have a salary that can easily cover the costs of your monthly mortgage you should contact us today.