Spousal Credit Scores

ANSWER:

Five years ago, it’s likely that your home was worth more than it is today. For instance, the Federal Housing Finance Agency said February home prices were 19.4 percent less than in 2007.

Lenders today look at three credit scores for each spouse. What’s acceptable for underwriting purposes will depend on the loan program you’re seeking, your credit standing and the equity you have in the property.

If the loan amount is pretty much the same as the value of the property, then in essence, you’re asking the lender to make a high-risk loan with little down, something that won’t happen without Veterans Affairs, Federal Housing Administration or private mortgage insurance.

The FHA will actually insure loans for borrowers with credit scores below 580, but only if such individuals can put down 10 percent instead of the 3.5 percent usually required for FHA coverage.

You could try to obtain financing on the basis of your credit score and income alone, or you might bring cash to closing and qualify for new financing by borrowing less. You can also contact a free HUD counselor (888-995-4673) to see if you qualify for any of the options available under the government’s Making Home Affordable program.

By refinancing at this time, it’s possible to lock in long-term fixed rates at or near historic lows. But such benefits are only available to those with strong credit profiles. If what you need to refinance is a better credit score, then the time to reduce household spending and pay down bills is now, before rates again rise.