Ditch your spouse when buying that house – NASDAQ.com

“Your spouse’s lower score might make it hard to get a mortgage or get a mortgage at a good rate,” says Anthony Sprauve, director of public relations with myFICO.com in San Jose, Calif.

“Lenders don’t take an average between your two scores.“

Rather, mortgage lenders base their loan decisions — including the mortgage rate — on the lowest credit score between you and your spouse, says Don Frommeyer, president of the National Association of Mortgage Brokers

 If your credit score is 800 and your spouse’s 650, lenders will assign an interest rate based on your spouse’s lower score, he says.

“It’s worst-case scenario,” Frommeyer says. “Even though one spouse might have a great credit score, it’s all based on the worst score.”

Applying for a mortgage on your own brings up another challenge

Lenders also look at your debt-to-income (DTI) ratios when deciding who qualifies for home loans Most lenders want your total monthly debts — including your newly estimated mortgage payment — to equal no more than 36 percent of your income before taxes are taken out. If you are relying solely on one income, leaving the money generated by your spouse on the sidelines, you might struggle to meet the lender’s DTI ratio. You might be forced to apply for a smaller mortgage loan on a less expensive home.

Go at it alone: If your income is high enough, or if you and your spouse aren’t opposed to living in a smaller, less expensive home, it might make sense to apply for a mortgage on your own, especially if your spouse’s credit score will leave you with a more expensive mortgage.

FHA: If a spouse’s credit score is making conventional financing difficult, consider a mortgage insured by the FHA. While the FHA doesn’t have specific credit score requirements, FHA mortgage lenders typically reserve the best rates for borrowers with credit scores of 620 or above, says Keith Gumbinger, vice president of HSH.com.

Credit rehab: If you’re dependent on both incomes, it’s time to help rehabilitate your spouse’s credit. Your spouse can boost their bad score by paying bills on time and in full every month, fixing any credit-report errors, eliminate disputed accounts, and keeping credit lines open but learning to use them wisely.