Now, if you need her income to qualify, then it can hurt.
However, you would be surprised at what can be approved thru FHA.
If her scores are over 620.... there will be no negative effect on the rates. If they are under, then risk based pricing will ad a little to the rate.
Many times I have seen a borrower who couldn't get approved alone, add a great credit co-borrower to the loan and get approved. So, she may not hurt you as much as you think.
1. Don't be afraid to apply.... it is free. If someone tries to charge an application fee, find a new loan officer.
2. Do NOT pay any collections as a condition of loan approval. FHA doesn't require that.... though, some lenders do. If bank 1 can get you approved by paying collections, bank 2 will definately get you approved WITHOUT paying them.
Judgments/tax liens are the exception to what doesn't have to be paid off.....
Lenders that do not pull spouse credit for FHA are in violation of FHA regulations. The underwriter can choose to ignore some items for a variety of reasons, however. Conventional loans do not require it, but lenders generally pull both anyway, because it is sound lending practice.
The primary earner is key here. If she earns the majority of household income or if you cannot support the loan on your own income, you may have some issues to deal with. This does not mean it is impossible, just more difficult than other borrowers.
Please note that last year things were pretty easy going. Everybody has gotten religion now. Following the rules is important to appraisers, who give values to lend on, and to underwriters, who decide whether a loan is risky or not according to guidelines. Appraisers are not automatically giving a value that will support a loan, and neither are underwriters "making it work" when the rules are being bent.
The best course of action is to get pre-qualified with a lender. Then you will know what you're up against. If credit issues need to be addressed, then go fix them. If your in satisfactory shape, then go buy a house.
First of all, "all states" do not require you to have the wife on the loan and/or title. Also, it is not "FHA" who requires the wife's debts to be pulled, seeing as we don't have to do that in NY either.
The only caveat is that FHA will not allow 1 spouse on the loan, and 2 on title. Also, if a non-occupying co-borrower is on the loan, they have to be on title too.
I have numerous times left 1 spouse off if they have poor credit and I can qualify on 1 income alone. What you can't do is use the person with bad credit's income, and use the credit for the person without income.
As many others have told you, if you do not need her income to qualify for the loan then her credit is not an issue. If you do need her income to qualify for the loan, then you must get her credit repaired. Yes, it is true that FHA will overlook many derogatory items if her score is over 640, but if her credit is below 640 then you may need help repairing the credit.
We send hundreds of our clients to National Credit Solutions for help in repairing their credit reports and removing derogatory items. Call Greg Boswick at 1-888-WHY-FICO and get his advise. This is not a FREE service, but they are experts and it will be a good investment for you now and in the future.
Please feel free to call me or one of my team members with questions.
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