At Triad Financial Services, our professionals receive many questions about the minimum requirements that an applicant must meet in order to qualify for a manufactured home loan. One question we get asked quite often is whether a spouse’s credit score impacts the other spouse’s ability to qualify for the loan amount they need to buy a manufactured or modular home.
An important thing to know before we dive deeper into this topic is that obtaining a manufactured home loan with a less-than-perfect credit score is definitely possible. However, whether you’ll be able to qualify for this type of loan depends on several factors in addition to the credit rating.
Things to Consider when Applying for a Joint Loan to Buy a Manufactured Home
When trying to purchase a manufactured home with the help of a loan, married couples have the flexibility to apply together. This means that you can use both of your incomes, which may allow you to qualify for a larger loan amount and purchase a bigger manufactured or modular home.
On the downside, lenders look at both of your credit scores and typically consider the lowest median rating of the two when assessing your creditworthiness. What is the median credit score? In short, the median credit rating is the middle score of the ratings generated by the three credit reporting agencies. For instance, if your Experian score is 700, but you have a 750 rating with Equifax and another of 670 with Transunion, your median rating would be 700. If your spouse’s median credit score is lower than yours, the lender will use his or her rating to establish whether you qualify for a manufactured home loan. As well, the lender will determine the interest rate and terms of your loan based on the lowest score of the two.
Another important consideration when applying for a joint manufactured home loan is that a very good credit rating could help compensate for a lower score to some degree. Let’s say that your credit score is 790, while your spouse’s score is only 680. Although an applicant with a credit score of 680 could qualify for a manufactured home loan, your higher score may help you obtain a better interest rate on it. But if your spouse has a 540 credit score, it could ruin your chances of getting approved for a manufactured home loan, despite your higher score.
Assuming that your spouse’s score prevents you from getting the lowest possible interest rate or from qualifying for a manufactured home loan, it may be better to apply alone. Although lenders won’t take your spouse’s income into account, most of them still consider joint assets when assessing your eligibility.
It’s also essential to know that lenders look at your debt-to-income (DTI) ratio before approving your application. Expressed as a percentage, this ratio compares the total amount you earn each month to the total amount you owe. If your spouse has a good credit score but his or her DTI ratio is higher than yours, the lender could reject your joint application or offer you a higher interest rate than the rate you may obtain if you’d apply without your spouse.
Securing a Manufactured Home Loan when Your Spouse Has a Poor Credit Rating
When there’s a huge gap between credit scores, the best solution for a couple is to secure a manufactured home loan entirely through the spouse with the best rating, especially if he or she has sufficient income available. However, applying for a manufactured home loan without your spouse might translate into:
- A lower manufactured home loan amount – Because the lender can’t consider your spouse’s income when determining the loan amount you might qualify for, you’ll probably have to settle for a smaller manufactured home.
- A higher interest rate – Before lenders approve a manufactured home loan, they look at the DTI ratio of the applicant. But if you live in a community property state, your spouse’s outstanding debts could be counted toward your DTI ratio as well. If your spouse has a lot of debt, your DTI ratio will be higher. This means that you could have a harder time meeting the lender’s DTI requirements, which may lead to a turned-down application. Even if you qualify for a manufactured home loan, a higher DTI will most probably result in a higher interest rate or a smaller loan amount than expected.
If your spouse has poor credit, applying for a manufactured home loan on your own may allow you to bring your homeownership dream to life. What’s more, you can always refinance your manufactured home loan into a new loan with a smaller interest rate and better terms once your spouse’s credit score is high enough. Whether you wish to apply for a manufactured home loan with or without your spouse, we invite you to contact us today! Our loan officers will be glad to discuss your financial situation and present the manufactured home financing options available to you!