Getting a Mortgage When Your Partner Has Bad Credit

You’ve found the perfect home. You can already picture your life there—the furniture, the family gatherings, the future you’ll build together. You and your partner are ready to take the leap, so you start the mortgage pre-approval process, only to come to a screeching halt. The reason? Your partner’s credit score is lower than you expected, and the bank’s answer is a firm "no."

This is an incredibly common and stressful situation. It’s a delicate mix of financial realities and relationship dynamics, and it can feel like your dream is suddenly slipping away. The first thing to know is this: getting approved for a mortgage with a bad credit partner is not impossible. It’s a hurdle, but it is one that can be overcome with the right strategy.

This guide will provide you with a clear, judgment-free roadmap. We'll explore the primary options available when facing a joint mortgage bad credit scenario, from applying with a single income to working with specialized lenders. We’ll also discuss long-term strategies to rebuild credit and put you both in a stronger position for the future.

Why a Low Credit Score Can Derail a Joint Application

Before we explore the solutions, it’s important to understand the problem from a lender’s perspective. When you apply for a mortgage as a couple, traditional "A-lenders" (like the big banks) will look at your application as a whole, but they will also scrutinize the weakest link.

Most major banks use a credit score of 680 as their general benchmark for a prime application. If one applicant is well above that (say, 800) but the other is significantly below (say, 580), the bank’s automated systems will often flag the entire application as high-risk. The lower score can overshadow the stronger partner's excellent credit history, leading to an immediate decline, even if your combined income is more than enough to afford the home.

The bank sees the low score as a potential indicator of future risk. Their primary concern is simple: will you make your payments on time? A history of missed payments or high debt on one partner’s credit bureau is a red flag that their underwriting models are not designed to ignore. This is why the first and most straightforward strategy often involves rethinking the application itself.

Option 1: The Single Applicant Strategy

If one partner has strong credit and sufficient income, the simplest path forward is often to apply for the mortgage using only their information.

How It Works

You would submit the mortgage application with only the partner who has the stronger credit and income profile. The lender will only assess that individual's credit score, income, and debts. The partner with the bruised credit is effectively left off the mortgage application, meaning their credit history is not a factor in the approval.

The Pros

Access to "A" Lenders and Prime Rates: By using only the strong applicant, you can often still qualify for the best interest rates from traditional banks.

Simplified Process: The application is cleaner and more straightforward, avoiding the complications and questions that come with a low credit score.

The Cons

Reduced Borrowing Power: This is the biggest drawback. The mortgage qualification will be based on a single income, not two. This will significantly reduce the amount of mortgage you can afford and may mean you have to look for a less expensive home or come up with a much larger down payment.

A Crucial Question: Title vs. Mortgage

This leads to a very important legal question: "Can my partner be on the title of the home if they aren't on the mortgage?"

The answer is yes. It is possible to have one person on the mortgage (the person financially responsible for the loan) and both partners on the title (the legal owners of the property). However, many "A-lenders" are hesitant to do this. They prefer that the people on title are the same people on the mortgage. This is a situation where a mortgage brokerage has a distinct advantage. We work with lenders who are comfortable with this arrangement, which can provide legal protection for the partner who is not on the mortgage. It's also important to understand concepts like matrimonial home rights in Ontario, which can grant ownership rights to a spouse regardless of whose name is on the title. This is a topic you should always discuss with your real estate lawyer.

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Option 2: Exploring the Alternative Lending World

If the single-income strategy doesn't provide you with enough borrowing power, your next step is to look beyond the big banks. The alternative lending market exists specifically for situations like this.

Working with "B Lenders"

B Lenders, often called "alternative lenders", are financial institutions that specialize in clients who don't quite fit into the strict boxes of the big banks.

How They Help: B Lenders are far more flexible when it comes to credit. They are willing to listen to the story behind the numbers. Was there a divorce, a job loss, or a past financial mistake that caused the credit issues? If the problem is in the past and the partner has been working to re-establish good credit, a B Lender will often look past the low score, especially if you have a strong down payment (typically 20% or more).

The Trade-Off: This flexibility comes at a cost. Interest rates at B Lenders are typically 1% to 2% higher than prime rates from the big banks. They also usually charge a lender fee, which can be around 1% of the loan amount.

The Brokerage Take: We often describe B Lenders as a bridge. The goal isn’t to stay with a B Lender forever. Our team helps clients secure a mortgage with a B Lender for a short term (1-2 years). During that time, we work with them on a plan to rebuild the partner's credit. At the end of the term, their credit has improved, and we can move the couple's mortgage back to an "A" lender with a much better interest rate.

The Role of Private Lenders

For the most challenging credit situations (e.g., a recent bankruptcy or consumer proposal), private lenders in Ontario can provide a solution.

How They Help: Private lenders are individuals or groups who invest their own money in mortgages. Their decision is based almost entirely on the property itself and the size of your down payment. As long as you have a substantial down payment (usually 25-35%), they are far less concerned with credit scores.

The Trade-Off: This is the most expensive option. Interest rates and fees for private mortgages are higher than B Lenders.

The Brokerage Take: A private mortgage is a short-term tool used to solve an immediate problem, like closing on a dream home that you would otherwise lose. It’s a way to secure the asset now, giving you the time you need to fix the underlying credit issues before moving to a more traditional lender.

Option 3: Strengthening the Application

If you are determined to get an approval from an "A" lender, there are two other ways to strengthen your application and offset the risk of a spousal bad credit situation.

1. Bringing on a Co-Signer

A co-signer is someone, usually a parent or close family member with strong credit and income, who agrees to be on the mortgage with you.

How It Helps: The co-signer's financial strength is added to the application, effectively vouching for you and your partner. Their income can be used to help you qualify, and their strong credit history provides the lender with an extra layer of security.

The Responsibility: It’s critical to understand that a co-signer is not just a reference. They are legally 100% responsible for the mortgage debt. If you miss payments, the lender will pursue them for the money, and it will damage their credit score.

2. Increasing the Down Payment

Cash is king, especially when dealing with credit issues. A larger down payment reduces the lender's risk, which can sometimes be enough to sway their decision. If a lender is on the fence, showing that you have more "skin in the game" with a 25% or 30% down payment instead of the minimum can make a big difference. It demonstrates financial discipline and reduces the loan-to-value ratio, which is a key metric for lenders.

The Long-Term Strategy: Rebuilding Credit Together

No matter which path you take to get into your home, the long-term goal should always be to improve the partner’s credit score. A higher credit score will open up a world of better options and lower interest rates when your mortgage comes up for renewal.

Here are a few actionable steps:

Get a Secured Credit Card: This is the single best tool for rebuilding credit. The partner provides a security deposit (e.g., $500), and gets a credit card with that same limit. By using it for small purchases and paying it off in full every month, they demonstrate positive payment history, which is reported to the credit bureaus.

Become an Authorized User: The partner with strong credit can add the other partner as an authorized user on one of their established credit cards. This can help "boost" their score by associating them with a long-standing, well-managed account.

Pay Every Bill on Time: Consistency is everything. Set up automatic payments for all bills to ensure nothing is ever missed. Payment history is the single biggest factor in a credit score.

Keep Credit Utilization Low: Aim to use less than 30% of the available limit on any credit card. High balances can negatively impact a credit score.

Bad Credit is a Hurdle, Not a Roadblock

Discovering that your partner’s bad credit is an obstacle to buying a home can be disheartening, but it is rarely the end of the road. From strategic application adjustments to exploring the world of alternative lenders, there are viable solutions available.

The key is to work with a mortgage broker with experience working with bad credit borrowers. While a bank may only have one set of rules, a mortgage brokerage has access to dozens of different lenders with varying appetites for risk. At 360Lending, we specialize in finding a home for complex applications. We can provide the compassionate, expert guidance needed to navigate this sensitive situation and find a path to getting you and your partner into the home you deserve.

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