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One home, one couple, two different mortgages possible?

J. K.
7 days ago

Forgive me if this is a dumb question but in this kind of housing market, I have to go down every avenue. Literally.


My girl and I are currently looking for a house. We're approved for a financing up to $360k on a joint application. However, we're running into difficulties because my girl doesn't have the best credit, so it's an FHA.


Me: Lower income, 820 credit, approved separately for up to $270k conventional

Her: Higher income, 690 credit, approved jointly with me for $360k FHA


My question is, is there a way to be approved by a lender somehow for $400k or more if a mortgage is split between us two? Financially, we can easily afford it monthly but I don't know if the ability to have two mortgages right off the bat, split between her and I, is available. We're having lots of trouble being beaten out for cash offers for houses between $300-$350k so I'm exploring every avenue to try and secure a house. Any help is appreciated. Thanks!

Comments (29)

  • J. K.
    Original Author
    7 days ago

    1) why did you feel the need to put that in quotes

    2) You'll have to explain further since it's about as generic of a response as it could get. Thanks for responding though

  • wiscokid
    7 days ago

    You can:

    1) wait and save while she works on the factors in her credit report that are causing that lower FICO

    2) try to find a house that is in the price range that you are approved for


    Unfortunately, most areas of the country are in very hot buyer's markets right now and it's pretty slim pickin'-s. Especially for those who require "non-traditional" financing like FHA/VA etc.

    J. K. thanked wiscokid
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  • J. K.
    Original Author
    7 days ago

    alright, so basically my idea doesn't exist in the real world haha, got it. Thanks @wiscokid!

  • J. K.
    Original Author
    6 days ago

    1) isn't really an option because any house that's in our budget right now will be $50k or higher in price by the time those factors could be rectified. So I guess we just have to be patient and hopeful and keep pushing

  • bry911
    6 days ago

    Generally speaking... yes you can do this. Now whether or not you specifically can make it work is another question. These are sometimes used for shared properties, such as vacation homes.

    One of the loans has to agree to subordinate to the other. The subordinate loan will be at a higher interest rate. That is not at all rare and often happens in Home Equity Loans. The problem being, because of credit concerns the subordinate loan is likely to be the person with the best credit.

  • maifleur03
    6 days ago

    With that credit rating unless it is from medical bills your girlfriend has bad spending habits. This is a "do not go" situation until she has those habits in check or all too soon your credit rating will be similar to hers. Do not count on her paying for even part of the mortgage.

  • mxk3 z5b_MI
    6 days ago

    Have you checked into smaller lenders like local credit unions? Particularly one that has an actual human being assess applications/extend credit and underwrite? If not, seek a few out and see what they have to say. Doubt I would have gotten approved for my current mortgage by a "big box" or on-line lender, but working with an actual live loan officer made all the difference. Have to say, it was a pleasant experience too (well, completely non-frustrating is probably a more apt description...).

    J. K. thanked mxk3 z5b_MI
  • J. K.
    Original Author
    6 days ago

    it was a medical situation @maifleur03


    @mxk3 z5b_MI finally, that's some great advice... we have a relationship with a local credit union, so even though their rates could be higher, it may benefit us in the long run. Thank you!

  • J. K.
    Original Author
    6 days ago

    Thank you wisco... I'm ignoring the stuff that isn't relevant from people who want everyone to be as miserable as they are ;-) those are great tips, and we're setting up the proper paths like that to protect each other. Looked like for us, tenancy in common is our best route

  • wiscokid
    6 days ago

    One other thing: check out the forums on MyFico.com - lots of good folks there who can help with tips/tricks/knowledge that you may not be aware of to help get that score up.

    J. K. thanked wiscokid
  • J. K.
    Original Author
    6 days ago

    I'll see what I can do there... I helped her out a lot after rehabbing my own credit but she's in the middle of settlement negotiations and that's not helping much. While the bank may not care much about negotiated accounts, a credit union may look into it deeper to figure out our true credit standing. Our salaries are there, and my credit is clear and debt-free, but it sucks that we're dragged down by things that are trending up anyway. Thank you again for all the great info!

  • bry911
    6 days ago
    last modified: 6 days ago

    First, you need to see a mortgage broker rather than a banker or a credit union loan rep. You need someone who is an expert on loan products rather than loan procedures.

    Next, I may be misunderstanding your point, but... The amount of loan you are qualified for has little to do with someone on the app having a 690 credit score. You need to find a bank with a more relaxed debt to income ratio rather than trying to shoehorn some esoteric financing in.

    A 690 is not a bad credit score. The rate premium on a 690 vs. 759 is 0.175%, that is the difference between a loan at 3% vs. a loan at 3.175%. Your net payment difference is $38 per month. It is likely that interest premiums on a subordinated loan or the origination fees associated with originating two loans will eat up that difference.

    J. K. thanked bry911
  • J. K.
    Original Author
    6 days ago

    a mortgage broker is who we are dealing with currently. We received estimates for both a joint application and me alone, which is where I pulled the info from in the original post.


    My question/hope was that we would both be able to pull separate mortgages to cover the cost of the house. Say we wanted a $400k house all hypothetical just to keep the math easy. If I could be approved for up to $270k, could she get a mortgage herself to cover the remaining $130k possibly conventional and we'd both be able to thereby go a conventional route so we're not left behind by those who don't take FHA and be able to pool our efforts better with around $145k in yearly household income


    this is great info, thank you @bry911!

  • bry911
    6 days ago

    I'm still a little confused...


    You noted that jointly you could qualify for a $360k loan. That number should not be based on your credit score, but your combined debt to income ratio. Therefore, if you qualify for a $270k loan by yourself, then your partner should qualify a $90k loan by herself. Now that might be adjusted a small amount for credit score, but not that significantly. I don't understand a situation where your combined qualification is $360k and your separate qualification is $400k.


    That is not to say they don't exist, banks can set all types of requirements, but if you are using a competent mortgage broker they should be able to find a loan that you jointly qualify for if you would separately qualify for the same loan.

  • J. K.
    Original Author
    6 days ago

    Mine was done separately by them to show what I alone could qualify for because I have the higher credit score and no debt, but I have the lower income. Then they did a joint application and we were approved for $360k but FHA because they went with her credit score. So that's why I was trying to figure out a scenario where we'd somehow both get separate mortgages so I can take advantage of what I qualify for and possibly cover the rest under her credit profile. Then as an addition, we would possibly be able to get more than the $360k we jointly qualify for and circumnavigate some of those who are buying houses in that price range who are coming to the table $30k over asking with full cash offers

  • bry911
    6 days ago
    last modified: 6 days ago

    Again, I am not trying to be obtuse but I don't understand how what you are describing is happening. For example, FHA makes no distinction between any credit score above 580 for debt to income ratios (DTI). Assuming your significant other has a standard credit profile she is likely getting a 37% front end ratio and a 47% back end ratio. That means that no more than 37% of her monthly income can be housing costs and no more than 47% can be total debt. If she has an 849 credit score she is likely getting a 37% front end ratio and a 47% back end ratio. So there is no difference.

    Banks can set their own back end DTI ratio, but a 690 credit score is not low enough to see that kind of shift in the back end ratio. Banks not in high cost of living areas will typically use a 28% and 36% front and back respectively regardless of credit score. A 500 credit score would only shift the back end ratio down 4%-6%. Other than that small adjustments to your DTI, there is no widely used metric for a lower credit score being a basis for a lower approval amount.

    Homes are not like unsecured credit cards. In a credit card the amount of your approval depends largely on your credit score, for homes, credit scores have a pretty insignificant effect on your total approval. They will affect if you are approved and the interest rate you are approved at, but are less likely change the amount you are approved for.

    ETA: A particular bank may operate differently, but a mortgage broker should be able to find someone who operates using the standard protocols.

  • Lindsey_CA
    6 days ago

    @Jim Mat said, "Get married"

    No, they don't have to get married to purchase a home together. My husband and I purchased our first home together in September 1980. Both names were on the loan application, both salaries and credit scores were taken into consideration, and both names were on title to the property. We got married in May 1986.

    Also, how someone refers to their significant other shouldn't be of concern to you.

  • rrah
    6 days ago

    If seller's don't want to accept an FHA loan, they certainly would be reluctant to accept the approval of two loans. If I was a seller, it would make me wonder about the financial ability of the buyers. Not sure if it's even possible.


  • Lindsey_CA
    6 days ago

    @Jim Mat - Yeah, I suppose you could say that I was my then-future-husband's "girl" because I was not yet his fiancée. I honestly do not know how he referred to me when he spoke of me to other people when I wasn't around. And he was then (and still is) an attorney, so he was/is well versed in contracts, etc. Also, we weren't in need of two separate mortgages, so there was no need to seek financial advice from anyone, anywhere.

    And what's it to you if a guy refers to his partner as partner, significant other, girl, girlfriend, lady, lady friend, baby mama, or anything else? What does it matter what anyone calls the other person in their relationship?

    J. K. thanked Lindsey_CA
  • maifleur03
    6 days ago

    Thank you for the clarification that it was medical which means it was necessary which is vastly different from bad spending habits. The medical lowering can be worked on but bad spending habits are hard to break.


    Even if you are approved for a certain amount you still need to look at how the payment including insurance, taxes, new furniture and equipment to maintain the property added in total. Expect a third to one half of your income to go toward your house if you purchase at the max you are approved for.

  • bry911
    6 days ago
    last modified: 6 days ago

    @Jim Mat - first, it is a fairly common moniker among young people, and it is generally not possessive but reverent. It obviously comes from the idea of someone saying, "that's my boy," or "that's my girl" when they are proud. You shouldn't assume derogation quite so quickly.

    Next, there is absolutely no reason to get married and doing so wouldn't change things at all.

    Good luck.

    ETA: With the SALT deduction cap functioning as a marriage tax, if one person is a high earner there might be some pretty good reasons to not get married.

  • bry911
    6 days ago
    last modified: 6 days ago

    Thank you for the clarification that it was medical which means it was necessary which is vastly different from bad spending habits. The medical lowering can be worked on but bad spending habits are hard to break.

    A 690 credit score is not that bad and it most certainly isn't sufficient to indicate a spending problem.

    In late 2019 my credit score dropped to under 700 because I chose to charge significant short term business expenses on my credit cards. That sent my utilization through the roof and tanked my score by about 100 points. I certainly don't have bad spending habits, I was just trying to avoid capital gains penalties that would have been significantly greater than my credit card interest for 45 days. My score went down because my credit risk went up, charging more than six figures on credit cards in a month's time is a major red flag for creditors. Early in 2020 I paid everything off and my score immediately jumped back up to around 795. Incidentally, I try to keep my score at about 775 unless I have a major purchase coming, mostly I use no interest balance transfers to increase my utilization and reduce my score.

    J. K. thanked bry911
  • maifleur03
    6 days ago

    Interesting Bry because every time I have paid something off my credit score drops.

  • Lindsey_CA
    6 days ago

    "Interesting Bry because every time I have paid something off my credit score drops."

    After we paid off the mortgage on our house, purchased in 1990, my FICO score dropped 15 points and has remained there.

  • bry911
    6 days ago
    last modified: 6 days ago

    I suspect that you are misunderstanding how credit scores work and that is creating something that seems true but really is just a function of some other mechanics in the algorithm.

    It is a bit hard to discuss credit score calculations because the weight of items is dynamic and changes at different credit scores. Generally speaking there are five big things that the Fair Isaacs Company (FICO) uses for scores.

    1. Payment history

    2. Revolving credit utilization

    3. Length of credit history

    4. Credit Mix

    5. New credit applications

    Judgments used to factor into your credit also but they no longer do.

    The following information is fairly solid if you have a FICO between 680 - 780:

    Payment history accounts for about 30%-40% of your credit score. This is simply not having any late payments.

    Revolving credit utilization is about 30% - 35% of your credit score. Utilization is a bit nuanced. Ostensibly the lower your utilization is the better, so zero is better than 9% usage on credit cards. However, we know there is actually a non-zero but very low number that FICO uses as ideal and you can use a third party calculator to find that number.

    I have about $200,000 in available revolving credit, my calculator golden number ratio is a bit less than $1,000 spread between cards. For some cards it wants as little as an $11 balance and for one the calculator recommended almost $200.

    At any rate, having those golden balances on every card is only a 1 to 3 point score movement. Generally speaking FICO wants you to have credit cards and not use them. Once you get above 75% usage, most people will lose a large portion of that 30% and that is big, but they will immediately get most of those points back below 10% and essentially all of them back for below 1%, with the exception of the weird 1 - 3 points that require a Magic 8 Ball to properly hit.

    As a bit of added nuance, this weight is calculated by individual credit card and by total credit cards. For example, if you have a credit card that is over its limit, even if your overall utilization is under 1% a person with an 800 credit score will lose about 30 points. For example, if you accidently use the wrong Best Buy card (why would one have two accounts anyway) and charge $1,000 on a card that has an $800 limit to take advantage of a 1 year no interest offer. Your score will drop by about 30 points if it happened to be around an 800 before. If this happens to you, there is no need to pay off your no interest early, simply call Best Buy and have them up your credit limit.

    Length of Credit History - Generally 10% - 15% of your score. This one is the most difficult to work on and requires some understanding early to properly manage. FICO looks at the unweighted average age of your credit cards, the age of your oldest credit card and the age of your newest credit card as well as how long it has been since you used accounts.

    Average age is the most important factor in that mix and the ideal average age is longer than 9 years. This is a problem for many people who close accounts and open new ones. Your best bet is to apply for and open as many credit card accounts as you can when you are young and never close them. This is just a function of proportional age.

    E.g. Suppose you have two credit accounts that are both 12 years old. If you open two new accounts your average age is going to drop from 12 years to 6 years and that will lower your score slightly. On the other hand someone who has 10 credit accounts that are all 12 years old will only see their average credit age drop to 10 years, which will not lower their score. This is especially hard to manage because it includes installment loans in that calculation.

    Credit Mix - Generally 10% or less of your score. This one is pretty opaque. We know that FICO likes for you to manage various types of credit but how they arrive at the perfect number is just about anyone's guess. They just keep telling us they want people to demonstrate an ability to manage a diverse credit portfolio.

    New Credit - Small impact for each new credit line, but this can add up to being more impactful if you are applying for a lot of new credit. This gets less impactful after 6 months and is largely irrelevant after 12 months. By that point, your utilization is a better indicator of your credit management than applying for new cards is so this gets ignored.

    _________

    The interplay between these numbers can be counterintuitive. For example, if your credit card utilization is above 30% the best thing you can do is apply for more credit to get your utilization down. While applying for new credit will ding you for the application, and it will lower the average age of your credit, the negative impact of those things on your score are far less impactful than having a 30% credit card utilization rate.

    ________

    Now, FINALLY, to the point made about paying off an account and lowering your score...

    Likely, you either paid off an installment loan or closed an account that affected your credit mix and age of credit history. It is possible that you were carrying an ultra-low balance and paying off the $11 you owed on a card with a $25,000 limit cost you a point, but those points are not worth monitoring.

    I know this is way too long but I hope it helps.


    ETA: Your credit score knows the difference between installment credit and revolving credit. Paying off a $180,000 mortgage is going to net different results than paying off $180,000 in credit cards.

  • gyr_falcon
    6 days ago

    I know it is a tough market out there right now. But another thing to think about is the risk of spending the maximum qualifying amount, or even over, for a house. Stuff happens, and spending all you qualify for often does not give you much room to save for unexpected events. Jobs and hours get cut, or a medical emergency happens, or the house needs an expensive repair, and you will want to maximize the ability to weather the storms with minimum danger of falling behind on your payments, while maintaining financial well being.


    We were more cautionary than most, and didn't enter in 40% of our income for the loan consideration. But when something happened that drastically cut our income for five years, we were able to remain current on our house payments and other expenses. I realize most don't have the option to have such a large comfort zone from the onset, but stretching your finances thin from day one, unless there is a financial windfall on the horizon, can be risky and stressful down the road.

  • bry911
    6 days ago
    last modified: 6 days ago

    With respect, the OP is talking about a 21% front end DTI... At their current levels of income, the OP will have between $6,000 and $7,000 per month of net income (bring home) remaining after they pay income taxes, medical insurance, house payment, house insurance, and property taxes.

    Given the OP's approval amount we can guess that if they are not living in a high cost of living area that their non-housing debt payments are about $2,100 per month. I would find $3,900 to $4,900 per month sufficient to live on...

    That is one of the problems with ratio based approvals. It assumes that a couple making well over $100k and couples making $70k, will need the same percentage of income reserved to pay phone, car, utilities, food, etc. In reality, you may have a nicer car and eat a bit better but many of your expenses don't scale linearly with income.

    I am not rubber stamping the OP's plan but given the OP's income this doesn't jump out as aggressive.

  • bry911
    6 days ago
    last modified: 6 days ago

    @ J. K. - I am assuming you are both fairly young... Do either of you have significant student loans?

    If you or her have student loans in excess of $30,000 you can elect for the extended repayment plan. That moves your loans from 10 years to payback up to 25 years and lowers your monthly payment significantly. That should lower your back-end DTI which will likely cover the $40k gap. I believe the plan keeps the same interest rate, it is just an election you make on the loans.

    Note: I am not recommending you take 25 years to pay back your student loans, extending them can actually shorten your payment period as you can focus on the higher interest rate loans first. I am just recommending you lower the required payment.