Buying a home with a spouse, partner, or family member often means combining finances, but what happens when one borrower has excellent credit and the other does not? This is a common situation, and the way it’s handled depends largely on the type of mortgage you choose.

Understanding how different loan programs treat credit scores and debt can help you structure your mortgage in the most strategic way.

How Conventional Loans Handle Credit Differences

With a conventional mortgage, lenders have more flexibility when structuring the loan.

If one borrower has strong credit and sufficient income to qualify on their own, the loan may be structured using only that borrower’s income and credit. In this case, the co-borrower with lower credit may not be included on the loan at all, which can help:

• Secure better interest rates
  
• Reduce mortgage insurance costs
  
• Improve overall loan approval terms
  

This approach can be especially helpful for married couples or partners where one borrower clearly qualifies independently.

Government Loans and Credit Score Rules

Government-backed loans follow stricter guidelines.

For FHA, VA, and USDA loans, lenders are required to:

• Pull credit for all borrowers
• Use the lowest credit score to determine eligibility and pricing
  
• Count all debts from every borrower toward the debt-to-income ratio
  

Even if one borrower has excellent credit and strong income, the debts of the co-borrower with lower credit will still be factored into the loan qualification.

Why Loan Structure Matters

Choosing the right loan program can have a major impact on:

• Mortgage approval
• Interest rate
• Monthly payment
• Long-term affordability
  

In some cases, using a conventional loan and excluding the lower-credit borrower from the loan may be the most effective option. In others, a government loan may still make sense based on down payment requirements or eligibility benefits.

Planning Ahead Can Improve Your Options

If you’re considering buying a home with someone who has lower credit, it’s important to review your options early. A pre-approval allows you to compare loan structures and determine which strategy best supports your financial goals.

Every situation is unique, and small differences in credit or debt can change the best path forward.

Get Expert Guidance on Structuring Your Mortgage

Navigating credit differences between borrowers doesn’t have to be overwhelming. Liberty Star Mortgage in Fulshear, Texas helps buyers evaluate loan options and structure mortgages in a way that makes the most financial sense.

If you’re buying with a co-borrower and want to understand how credit scores and debt will affect your loan, get in touch with Collette Horton to explore your best options.