Can I Get Approved for a Home Loan by Myself If My Spouse's Loan Is in Foreclosure?

Foreclosure can affect a second mortgage.

Many people think spouses must share a mortgage loan. In reality, it is up to you and your spouse to determine whether you would like a joint mortgage or an individual mortgage. If you maintain individual mortgages, one spouse's financial woes will not affect the mortgage if she is not a listed borrower. Therefore, if your spouse's loan is in foreclosure and you are not listed on the loan, it will not affect your credit.

Background

A joint mortgage is shared by more than one party. Typically, a joint mortgage is shared by a married couple. When it comes time to apply for a mortgage, each party applying for the loan has a separate credit score and income level. You can choose whether to apply jointly or singly based on credit, income and other factors. You can share the deed to the home, i.e. share ownership, without sharing the debt.

Considerations

Applying for a joint mortgage gives you the advantage of combining your incomes on the application, which may result in a higher loan limit. Your total debts will also be considered, giving a clearer picture of your financial status as a couple. Both credit scores will be considered, but the credit score of the higher earner is most important.

Foreclosure

If your spouse is going through a foreclosure, you may select to leave him or her off a new loan application. This means the debt and credit score he is carrying will not be considered. However, keep in mind the income your spouse earns will also be omitted. You will have to qualify based on your financial resources alone. This is particularly challenging if you are the lower wage earner.

Challenges

When you are applying for a loan based solely on a single income, you will not be able to get the biggest loan you can afford. Instead, you will have to settle for a loan that is much lower than your affordability level. This may mean you have to settle for a home that is below your income level. The compromise can be worth the sacrifice if your spouse is in foreclosure, however, because it may be the only option you have to qualify for a new loan.

References

• Trulia: How does foreclosure affect a spouse that is not on the loan document?
• MSN Money: Spouse's Bad Credit Creates Mortgage Stress