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Old 01-03-2009, 12:36 PM
 
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I live in VA and have a question about applying for a mortgage.

Over the years, both my spouse and myself have worked but all debt has been incurred under my name. Fast forward to today, my spouse no longer works, and we want to get a mortgage. Without her income, our debt-to-income ratio has suddenly increased as I'm the only one generating an income.

Nevertheless, I have a very good income and we want to purchase a home. So my question is this, if I want to be the only person on the mortgage, can I simply transfer a portion of debt from my name to hers since she is constantly bombarded with the 0% balance transfer loans and credit cards?

How will this play when we apply for a mortgage? Will only my credit and income be pulled, thus helping us out? Or will they still need to pull her credit and consider her debts as well?

I believe that somebody on here has said that FHA, regardless of where you live, must consider the debt of both spouses. What about another lender when trying to do an 80/15/5 loan?
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Old 01-03-2009, 07:38 PM
 
Location: MID ATLANTIC
8,430 posts, read 21,695,591 times
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In the state of VA, debt of both spouses does not need to be considered if only one is buying the property as their sole and separate equitable estate. The non-purchasing spouse does not have to provide any information if the other spouse is purchasing on their own. Only the purchasing spouse's debts would be considered (and that would include any joint obligations - watch even the 0 balance, joint, revolving accounts).

A couple of things could happen, here. One, you could wind up trashing her credit by loading her up w/ a boatload of revolving debt and tons of hard pulls of her credit. Technically, your score should not be hit, but I would keep a very close eye. If there were joint accounts closed, you bet they are going to pull your credit to see if there is something there they need to be aware of.

I have seen cases where paying off and/or closing accounts with revolving credit have actually harmed scores. If you are intent on attempting to do this, I can't push you towards a credit repair company fast enough. (Note: credit repair does not = bad credit needs to be fixed). You need someone that knows the ins and outs of scoring and the various nuances that go with it. If you are doing most of the work, the 1/2 hour - 1 hour consultation should be a reasonable fee.

Another reason for caution, many lenders will not allow for a rescored credit report. They have to work with the report as it comes into them. Sure, they can get a correction, but many will not accept a total re-work/re-score until 90 days are up. (ie, no rapid re-scoring). (Bank of America is one such lender).

Your questions are revolving around a closely held recipe. We have most of the ingredients figured out, but you need some specialized assistance. I do this all day long and I wouldn't begin to try to take on your situation. Good luck!
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Old 01-05-2009, 07:27 AM
 
5 posts, read 103,379 times
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Quote:
Originally Posted by SmartMoney View Post
In the state of VA, debt of both spouses does not need to be considered if only one is buying the property as their sole and separate equitable estate. The non-purchasing spouse does not have to provide any information if the other spouse is purchasing on their own. Only the purchasing spouse's debts would be considered (and that would include any joint obligations - watch even the 0 balance, joint, revolving accounts).

A couple of things could happen, here. One, you could wind up trashing her credit by loading her up w/ a boatload of revolving debt and tons of hard pulls of her credit. Technically, your score should not be hit, but I would keep a very close eye. If there were joint accounts closed, you bet they are going to pull your credit to see if there is something there they need to be aware of.

I have seen cases where paying off and/or closing accounts with revolving credit have actually harmed scores. If you are intent on attempting to do this, I can't push you towards a credit repair company fast enough. (Note: credit repair does not = bad credit needs to be fixed). You need someone that knows the ins and outs of scoring and the various nuances that go with it. If you are doing most of the work, the 1/2 hour - 1 hour consultation should be a reasonable fee.

Another reason for caution, many lenders will not allow for a rescored credit report. They have to work with the report as it comes into them. Sure, they can get a correction, but many will not accept a total re-work/re-score until 90 days are up. (ie, no rapid re-scoring). (Bank of America is one such lender).

Your questions are revolving around a closely held recipe. We have most of the ingredients figured out, but you need some specialized assistance. I do this all day long and I wouldn't begin to try to take on your situation. Good luck!
I suppose I should be more specific. My spouse and I both have credit scores of 700+ but, as mentioned, my debt-to-income is higher than I would like before I apply for a mortgage. My spouse has access to a line of credit (existing account promotion, no inquiry required) that would allow the transfer of a $600 per month account from my name to hers. This would, obviously, reduce my debt-to-income ratio accordingly now that the $600 per month obligation was removed.

Yes, my spouse's credit score would decrease by some amount due to the increased debt load but in no way would be "trashed". My credit score would not decrease, and may even increase by "paying off" this debt.

I was more curious as to whether the lender, who several months from now will be looking at my credit report and see that this obligation was quickly paid off several months ago, would want to know more details about how it was paid for and things of that nature.

It will obviously help my credit score and debt-to-income ratio but will it throw up any red flags?

Thanks.
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Old 01-05-2009, 07:35 AM
 
Location: Montrose, CA
3,031 posts, read 8,619,772 times
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Originally Posted by mortgage_question View Post
I
I was more curious as to whether the lender, who several months from now will be looking at my credit report and see that this obligation was quickly paid off several months ago, would want to know more details about how it was paid for and things of that nature.

It will obviously help my credit score and debt-to-income ratio but will it throw up any red flags?

Thanks.
So basically what you're saying is that you want to hide debt in order to qualify, and you want us to confirm or deny that you can get away with it scot-free before you try it.
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Old 01-05-2009, 08:08 AM
 
5 posts, read 103,379 times
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Originally Posted by SuSuSushi View Post
So basically what you're saying is that you want to hide debt in order to qualify, and you want us to confirm or deny that you can get away with it scot-free before you try it.
Perhaps you didn't read the entire thread before you responded. All debt incurred through our marriage is under my name. However, now that my spouse has chosen to no longer work, I'm interested in knowing the ramifications of transferring a portion of that debt to their name. There is nothing even remotely illegal or unethical about this question. I'm simply asking how a broker and/or lender views this.

If the earlier poster was correct, then it is perfectly acceptable to apply for a mortgage without your spouse's income, debt or credit being considered. Do you feel that this is not correct?
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Old 01-05-2009, 08:23 AM
 
Location: MID ATLANTIC
8,430 posts, read 21,695,591 times
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Quote:
Originally Posted by mortgage_question View Post
I suppose I should be more specific. My spouse and I both have credit scores of 700+ but, as mentioned, my debt-to-income is higher than I would like before I apply for a mortgage. My spouse has access to a line of credit (existing account promotion, no inquiry required) that would allow the transfer of a $600 per month account from my name to hers. This would, obviously, reduce my debt-to-income ratio accordingly now that the $600 per month obligation was removed.

Yes, my spouse's credit score would decrease by some amount due to the increased debt load but in no way would be "trashed". My credit score would not decrease, and may even increase by "paying off" this debt.

I was more curious as to whether the lender, who several months from now will be looking at my credit report and see that this obligation was quickly paid off several months ago, would want to know more details about how it was paid for and things of that nature.

It will obviously help my credit score and debt-to-income ratio but will it throw up any red flags?

Thanks.
Do you consider a drop of 100 points "trashed?" I do. And when you have someone that has a history of unused revolving credit to revolving credit usage on steroids, that is what will happen. Maybe not a red flag on you, but most certainly one on your wife. I will also share paying off (both closing and leaving the accounts open) have also had adverse effects on the individual that is retiring the debt. But, don't say no one warned you.

As for whether the lender will pick up on the fact everything was paid off recently - yes, it could most certainly could be questioned. In many of the underwriting underwriting engines, the fact you had a revolving account that was suddenly paid in full, and the account is still open, the minimum monthly payment on your high balance would be used in the qualifying. (This is when we found customers losing large point values when the revolving accounts they had were paid and now are closed. So, they would try to go back out and get new revolving accounts, and the scores kept dropping). So, you could have a VISA w/ a zero balance, yet the AUS is counting a minimum payment against that account.

The algorithms for credit scoring are better guarded than the coca cola recipes. We have figured out many of the tricks, but continue to be blind-sided when trying to find alternate solutions. Underwriters have gone into fraud prevention underwriting and it's something we are all going to have to become familiar with because it's not going anywhere fast. That's not to infer fraud describes your debt restructure, but it will be why the file is scrutinized more than normal. I am sorry you are not hearing what you think you should hear. I stand by my statement, take the time and the expense to consult someone experienced in this field.
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Old 01-05-2009, 08:29 AM
 
Location: Montrose, CA
3,031 posts, read 8,619,772 times
Reputation: 1971
Quote:
Originally Posted by mortgage_question View Post
Perhaps you didn't read the entire thread before you responded. All debt incurred through our marriage is under my name. However, now that my spouse has chosen to no longer work, I'm interested in knowing the ramifications of transferring a portion of that debt to their name. There is nothing even remotely illegal or unethical about this question. I'm simply asking how a broker and/or lender views this.

If the earlier poster was correct, then it is perfectly acceptable to apply for a mortgage without your spouse's income, debt or credit being considered. Do you feel that this is not correct?
Where did I say it was illegal? All I said was, you're trying to hide debt. You admitted as much yourself, by saying:

"I was more curious as to whether the lender, who several months from now will be looking at my credit report and see that this obligation was quickly paid off several months ago, would want to know more details about how it was paid for and things of that nature.

It will obviously help my credit score and debt-to-income ratio but will it throw up any red flags?"



From that one may quite readily infer that you don't want the lender asking questions about it. If you didn't have doubts about it, you wouldn't have asked, you'd have just gone ahead and done it -- or you would have asked your lender about it.

Just sayin'...
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Old 01-05-2009, 08:34 AM
 
5 posts, read 103,379 times
Reputation: 12
Quote:
Originally Posted by SmartMoney View Post
Do you consider a drop of 100 points "trashed?" I do. And when you have someone that has a history of unused revolving credit to revolving credit usage on steroids, that is what will happen. Maybe not a red flag on you, but most certainly one on your wife. I will also share paying off (both closing and leaving the accounts open) have also had adverse effects on the individual that is retiring the debt. But, don't say no one warned you.

As for whether the lender will pick up on the fact everything was paid off recently - yes, it could most certainly could be questioned. In many of the underwriting underwriting engines, the fact you had a revolving account that was suddenly paid in full, and the account is still open, the minimum monthly payment on your high balance would be used in the qualifying. (This is when we found customers losing large point values when the revolving accounts they had were paid and now are closed. So, they would try to go back out and get new revolving accounts, and the scores kept dropping). So, you could have a VISA w/ a zero balance, yet the AUS is counting a minimum payment against that account.

The algorithms for credit scoring are better guarded than the coca cola recipes. We have figured out many of the tricks, but continue to be blind-sided when trying to find alternate solutions. Underwriters have gone into fraud prevention underwriting and it's something we are all going to have to become familiar with because it's not going anywhere fast. That's not to infer fraud describes your debt restructure, but it will be why the file is scrutinized more than normal. I am sorry you are not hearing what you think you should hear. I stand by my statement, take the time and the expense to consult someone experienced in this field.
The $600 per month outflow is not a revolving account at all, it is an auto loan with a balance of approximately $13,000. However, rather than paying it off in cash, I want to keep that money in the bank to aid in closing and downpayment costs.

I don't disagree that the credit scoring system is hard to figure out. However, due to my subscription to one of the FICO credit monitoring services, I keep a close eye on my score and how using (and paying off) credit accounts affects my score. And I can tell you from experience that paying down an auto loan (and even revolving accounts even though it doesn't apply here) has NEVER made my score decrease. In fact, quite the opposite.

I can also assure you that transferring a mere $13,000 to my spouse, will not drop their score anywhere near 100 points. I said my spouse has no debt, I didn't say that they had no credit history.

Nevertheless, it does help to hear differing opinions on this matter. Thank you for your input.
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Old 01-05-2009, 08:41 AM
 
5 posts, read 103,379 times
Reputation: 12
Quote:
Originally Posted by SuSuSushi View Post
Where did I say it was illegal? All I said was, you're trying to hide debt. You admitted as much yourself, by saying:

"I was more curious as to whether the lender, who several months from now will be looking at my credit report and see that this obligation was quickly paid off several months ago, would want to know more details about how it was paid for and things of that nature.

It will obviously help my credit score and debt-to-income ratio but will it throw up any red flags?"


From that one may quite readily infer that you don't want the lender asking questions about it. If you didn't have doubts about it, you wouldn't have asked, you'd have just gone ahead and done it -- or you would have asked your lender about it.

Just sayin'...
Ok let's look at it this way for a minute.

Situation #1:

There is a married couple who both work and each have x amount of debt under their names (i.e. spread evenly with total debt equal to 2x). Now, one spouse quits working and the other applies for a mortgage all by themself. In this scenario, the lender only looks at the debt under the applicants name and not the spouse. So the lender sees x amount of debt.

No problem right? Nobody is "hiding" debt right?

Situation #2:

There is a married couple who both work and all debt over the years was, for one reason or another, put under one spouse's name. The total debt is the same as the scenario above at 2x. One spouse stops working and the couple now rebalances the debt evenly among them so that they each have x amount of debt. The working spouse now applies for a mortgage all by themself and the lender only looks at the debt of the applicant and not the other spouse and the lender sees x amount of debt.

Is this different than the first scenario or the same?
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Old 01-05-2009, 09:27 AM
 
Location: Montrose, CA
3,031 posts, read 8,619,772 times
Reputation: 1971
Dude, justify it to yourself all you want. You want a difference answer from us than we're giving, too bad. I think it's dodgy, especially given how you phrased the question to sound as if you didn't want the lender finding out you transferred the debt to your wife.

But hey, knock yourself out and see what happens.
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