When planning to buy a home with your partner, their credit score can significantly affect your financial journey. A recent study by the Mortgage Research Network reveals that a partner with a credit score below 640 can increase monthly housing costs by an average of $437. Over a typical 12-year homeownership period, this translates to nearly $63,000 in additional expenses, driven by higher interest rates, steeper mortgage insurance premiums, and more expensive homeowners insurance.
💸 The Cost of a Low Credit Score: $437 More Per Month
Couples purchasing a home together where one partner has a credit score under 640 pay an average of $437 more per month in housing costs compared to couples with better credit. That’s an additional $62,868 over the typical 12-year homeownership period.
This cost increase is largely due to:
- Higher mortgage interest rates
- Costlier private mortgage insurance (PMI)
- More expensive homeowners insurance
As an added bonus, research has shown that couples with similar and higher credit scores are more likely to stay together.
📊Regional Variations in Cost Increases
The study analyzed homeownership expenses in major U.S. cities, comparing scenarios where one partner has excellent credit and the other does not. The impact varies by region, with some metro areas seeing dramatic percentage increases in housing costs:
- Memphis, Tennessee: 30.2% increase
- Detroit, Michigan: 29.9% increase
- Oklahoma City, Oklahoma: 24.1% increase
- Kansas City, Missouri: 20.4% increase
- Indianapolis, Indiana: 19.2% increase
In high-cost areas, the dollar amount of the increase is more significant. For example:
- San Jose, California: Monthly costs rise from $11,092 to $12,141, a $1,049 increase (9.5%).
- San Francisco, California: Costs increase from $9,807 to $10,733, a $926 increase (9.5%).
While percentage increases are lower in expensive markets, the cash impact is substantial due to higher baseline home prices.
🛠Solutions for Couples with a Low Credit Score
The study suggests several strategies to mitigate the financial burden of a partner’s low credit score:
- Explore FHA Loans: These are more flexible for lower credit borrowers and often come with lower interest and insurance costs.
- Consider VA or USDA Loans: If eligible, these programs offer 0% down payment options and can ease the burden of credit-related expenses.
- Apply With Only the Stronger Credit Profile: Some couples may choose to have only the higher-credit partner on the mortgage.
- Refinance Later: Once the lower credit score improves, refinancing the mortgage can reduce interest rates and eliminate mortgage insurance.
Summary
While shared goals and mutual trust form the foundation of any strong relationship, financial compatibility—especially in credit—can have long-term consequences on major decisions like buying a home. Before applying for a mortgage together, review your credit scores and consider how combining your financial profiles will affect your buying power. In some cases, waiting to buy or applying under one name may be the smarter move.
Are you thinking about buying or selling a home in the South Florida area? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, be sure to download the free Florida Home Search App for your smartphone or tablet.
