Financial issues can plague a family for years. When the husband has a gambling problem, the wife often pays for it. Wife with a shopping addiction? The husband's credit will suffer if she can't pay for it. Couples who work together on their portfolio enjoy success together. But they can also suffer together when one fails. This can affect your decision about getting a mortgage loan to buy your dream home. But all is not lost. A home buyer had this question recently, and we decided to explore it a bit.
"I declared bankruptcy, not my wife. Can we still get a mortgage loan?"
The short answer is yes. The other spouse (without the credit blemish) would be the only one on the loan. So if newlyweds want a new house but the young husband had financial problems after college, the new wife will be the borrower. This of course means the wife's income is the only one accounted for in the application.
With that in mind, it's helpful to understand information about bankruptcy and short sales in your past when it comes to getting a mortgage loan in the future. A recent short sale will keep you from getting a mortgage for about 3-to-4 years. We've talked about this before. Here's an excerpt from that article:
The mortgage banking business is based on the reliability of borrowers to pay back the mortgage notes on their homes. In other words, if you can't pay your bills, you won't be able to find financing to buy a house. Low credit scores are one measure of a person's likelihood of paying back a debt. Recent financial hardships are another. If you recently went through a short-sale, you will fall into these categories. A financial institution will not lend money to a potential borrower who, at this point, is having financial trouble (regardless of the reason behind the financial issues).
A Few Notes
- A short sale is different from filing bankruptcy. The threshold for that is actually 2 years.
- "Deed in lieu" is also a foreclosure.
- If you filed bankruptcy and included the house in the bankruptcy, then you had a "bankruptcy and foreclosure," and you will have to wait 3 years from when the home ownership transferred.
You can learn more about the home buying process with the free guide below. Download "The Credit Guide" to learn about FICO scores, improving credit and whether it's a good idea to pay off all collections or not (hint: the answer may surprise you).