Joint Mortgage Application: Should You Apply Alone or With a Partner?

Applying for a mortgage with a partner? The decision to apply jointly or individually is primarily financial. If you need your partner's income to qualify, a joint application is necessary. However, if you can qualify alone, applying solo may secure a better interest rate if your partner has a lower credit score, as lenders use the lowest median score between applicants. This guide analyzes the key credit and income trade-offs to help you make an informed decision.

What is a FICO Score and Why is it Critical for a Mortgage?

Your FICO score (a credit scoring model developed by Fair Isaac Corporation) is a number between 300 and 850 that lenders use to assess your credit risk. This score is calculated based on your payment history, amounts owed, length of credit history, new credit, and credit mix. For mortgage applications, this is the primary score lenders evaluate to determine your loan eligibility and the interest rate you will be offered. A higher score signals lower risk to the lender.

How Do Lenders Evaluate Credit Scores for a Mortgage?

When you apply for a mortgage, the lender typically pulls a report from each of the three major credit bureaus—Experian, TransUnion, and Equifax. They then use the median score from these three reports for their assessment. Based on our experience assessment, a score of 680 or higher is generally the minimum for conventional loan approval. For government-backed loans like an FHA loan, a score as low as 580 may be acceptable, or even 500 with a larger down payment. The fundamental rule is that a higher credit score will result in a more favorable interest rate.

What Happens to Your Application if Your Partner Has Bad Credit?

On a joint mortgage application, lenders will base their interest rate offer on the applicant with the lowest median credit score. For example, if your score is 780 and your partner's is 620, the loan's pricing will be based on the 620 score, potentially costing thousands more over the loan's life. In this scenario, applying alone could be financially advantageous. The significant downside is that the lender will only consider your individual income, which may drastically reduce the loan amount you qualify for, potentially limiting your home purchase options.

Can You Be on the Home Title Without Being on the Mortgage?

Yes. It is a common misconception that being on the mortgage and being on the property's title (the legal document proving ownership) are the same. You can have your name on the title without being a borrower on the mortgage loan. This means you would be a legal owner of the home but not legally obligated to repay the debt. This arrangement can be a solution when one partner needs to apply alone for a better rate but both want ownership rights.

To summarize, your best path forward depends on your specific financial profile:

• Apply jointly if you need your partner's income to qualify for the desired loan amount.
• Consider applying alone if your income is sufficient and your partner's credit score is significantly lower, as this will likely secure a better interest rate.
• Remember that ownership (title) and debt responsibility (mortgage) can be separated, allowing both partners to be homeowners even if only one is on the loan.