More people would be looking at buying a home in Arizona with the No Down Payment USDA Loan if they could buy without their spouses negative credit. There are a great deal of reasons why one spouse may have very good credit and the other may have some negative credit marks; especially in this current economy.
They are called Spouse Only Loans and the USDA Loan does allow them. The Spouse Only Loan looks ONLY at the credit report history of the borrowing spouse and does NOT even look at the credit history for the non-borrowing spouse. The good news is if YOUR credit qualifies and your spouse has a bad credit history, you have the solution of not including your spouse on the USDA loan.
The RD AN number 4543 tells us explicitly that the Non-purchasing spouses credit rating is NOT considered a reason to refuse a USDA Loan application.
However, Arizona is a community property state so your application must disclose your spouse’s community property debt obligations on the application and you will need to qualify with those debt payments.
Here is how the program works…
The System will pull your credit and we will pull the credit of the non-borrowing spouse in order to determine the accurate obligations for qualifying. At closing, the non-purchasing spouse does not sign the note, but must sign the security instrument.
However since the USDA Home Loan has a total household income limit, you will need to provide the full income documentation for the non-borrowing spouse.
On the other hand, even though you are providing income information for your spouse, you will need to qualify for the Rural Development Loan by yourself. A non-buying spouse’s income is only looked at for qualifying under the income limits, not for qualifying for the new loan.
This is yet another practical edge that the USDA loan has over FHA loans.
I hope you found this Arizona Home Loan tip useful and would love to hear your comments.
To find out if you qualify for a USDA Loan call (520) 225-0380 or click on the Get Started on USDA tab over at USDARuralHomeLoans.com. If you want to go ahead and get your application in, you can fill out my Home Loan Application Online here.