How Many People Does It Take To Qualify For A Loan?

Question:

How many people should you include on your mortgage application in order to qualify for a loan?

Answer:

As few as possible.

Recently I had a file come across my desk from someone who used to work in the mortgage business. They are in the process of possibly losing their house and were wondering what their options are at this point.

In 2002-2007, the husband made significant amounts of money - enough to qualify for a very large mortgage.

When they bought their home in 2006, the husband worked, the wife didn’t and the husband made plenty of money to qualify for their mortgage on his own. For whatever reason, when they bought the house, both husband and wife decided to be on the loan - even though they only used the husband’s income and credit to qualify.

Fast Forward to 2009 and they are now facing the real possibility of both of their credit profiles going-down-the-tubes unless something happens where they get a loan modification done and they are able to save their house from foreclosure.

“Is there any way to get my wife off of the loan so that at least her credit won’t be impacted and at least one of us will have decent credit?”

No.

Not now.

You can’t remove a borrower from a loan without refinancing and in order to refinance, you are going to have to completely re-qualify for a new loan. In this case, this couple can no longer qualify together - much less with only the husband’s income.

When I was younger, I learned a phrase that can be directly applied to this situation:

“Control the downside and the upside will take care of itself.”

Had this couple controlled the downside by having as few people on the loan as possible (i.e. only the husband) if everything went wrong - they could at least save the wife’s credit in the process.

Which is why when I am asked the question “Do you think my wife should be on the loan with me?”

My answer usually is…

It depends.

February 5, 2009