Which is the better scenario for getting the best Mortgage rate? Should I sign alone, or should spouse sign 2?

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My spouse and I own one home, which we are renting
We are purchasing a second home
My income, alone, should be able to qualify for the loan
My spouse is temporarily between jobs, due to relocation
Our credit scores are both in the 700 range, with hers slightly higher
We have approximately in 30K in bad debt (auto/credit card), most of which is under my SS#, though we could move some over to hers
I should clarify, by “Bad Debt”, I mean Credit Card and Automotive debt. We are current on all of the payments, and have not been delinquent at any point.

  1. Reply
    May 3, 2011 at 11:33 pm

    If you have 30K in bad debt, you are going to have to deal with that before you qualify for a mortgage. Since your wife isn’t employed right now, the mortgage will be based on your income and credit. Shifting the bad debt to your wife’s SS, isn’t a good idea. It will still count in the mix.

    Is that 30K really bad debt or just current debt? It does make a big difference.

  2. Reply
    mark d
    May 4, 2011 at 12:25 am

    What you need to be concerned about is your debt to income ratio. Ideally it should be no higher than 50%. The reason I say this is that a lot of mortgage companies will not count all of your rental income in determining your DTI, some will only count about 75% of what you receive in rental income. If your wife has any outstanding credit in her name alone that could effect your DTI and you would want to leave her off of the mortgage. Your DTI could also effect the amount that you have to put down. Some banks will only do 85% loan to value if your DTI is too high. I would suggest that you add up all of your monthly obligations and compare that with your income to see if it would work.

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