How To Get a Zero Down USDA Mortgage Even If Your Spouse Has Bad Credit

Spouse with Bad Credit

Many people may not realize but a spouse’s low credit score could disqualify you from getting a home mortgage in the future. In most cases, the lower a person’s credit score, the higher the conventional mortgage rate will be. However in some cases, you may not be eligible for a mortgage at all. Another problem with low credit scores is that when you apply for a mortgage with your spouse, even if your spouse has an excellent credit rating, it won’t make up for your partners lousy one. This is because current underwriting guidelines require that lenders default to the lower credit score between two spouses when determining the borrowers risk. While this is widely considered an unfair practice, it can be a major factor in deciding whether or not you qualify for a home mortgage.

Your Options

If you’re looking to apply for a mortgage but you’re concerned about your spouse’s low credit score, you still have some options. First off, you can always purchase the house on your own and apply for the mortgage without your spouse. Your good credit rating will help you to get a much lower mortgage interest rate than you would have if you applied jointly. However, the downside to this approach is that you may end up qualifying for a much smaller mortgage, since your lender will only consider your income. If you do not make as much money as your spouse, or you don’t make enough individually to secure the mortgage you need, you may be out of luck. Another option is applying for a USDA rural home mortgage.

USDA Rural Home Mortgages

USDA rural home mortgages are designed for moderate to low income families looking to buy a house in a small town or rural area. USDA mortgages are some of the most credit flexible loans on the market, offer low interest rates and require no money down. USDA home mortgages are excellent mortgage opportunities and offer some of your best chances of getting approved. This is partly because of the income limits the USDA puts on home mortgages. Because the USDA rural home mortgage program is designed to help moderate to lower income families secure a home loan, if you make too much money you can actually be disqualified. This can give an opportunity for a spouse with good credit to secure a rural home loan themselves, even if they don’t have a large income.

The USDA also has some of the most credit flexible home loans available. While most traditional lenders will not consider a mortgage with a credit score below 650, USDA mortgages will go as low as 580, sometimes lower in certain circumstances. You also may be able to apply for an adverse credit history waiver, but will need to show extraordinary compensating factors to qualify.