“Dear Steve,
I am thinking of getting a VA Loan. I would be buying the house with my boyfriend. I have great credit (780) but his is low, and has 2 foreclosures. I don’t feel I have enough income to only use mine. I’m tired of renting and have done it my whole life, I’m 35. Any advice you could give would be greatly appreciated.
Would our credit balance each other out? Or would the interest rate be really high because of his bad credit and it wouldn’t matter that mine was good?
Shelly”
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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Dear Shelley, I agree with Chris that buying a home with someone you are not married to can be tricky. It’s already tricky if you are married.
He is correct that the lowest credit score will be the one that the pricing on your loan and that can be huge with add ons added in mid-2009 for mortgages. In addition to that, any late payment made by him on this loan will also reflect on your credit. If you do decide to do this, do it with your eyes wide open. You will need to see an attorney to draw up a buy-sell agreement in case you do break up.
Also, be aware that his past credit history could also reflect basic irresponsibility in financial matters. It is always better if you can do the mortgage on your own. Even if you stay happily together, married or not, any dings on the other side will not affect you and between the two of you, you may also have more opportunities for credit. Good Luck!
Shelly
The one drawback to having a co-borrower with bad credit is that your interest rate will be determined by his credit not yours. If he has more income than you, then he will be the primary borrower. My advice would be not to do the loan with him since you are not married. Relationships can end at any time and since you are not married it can turn into an ugly situation if things don’t work out. Wait until you are able to find something that you can afford on your own.
Chris