How To Get A Zero Down USDA Loan Even If Your Spouse Has Bad Credit

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Does The USDA Loan Ignore Your Spouses Bad Credit?

USDA-Loan-Spouse-Only-LoanMore people would be looking at buying a home in Arizona with the Zero Down Payment USDA Loan if they were not held back by their spouses bad credit.  There are lots of reasons why one spouse may have pretty decent credit and the other may have some bad credit dings; especially in our current economy.

These are called Spouse Only Loans and the USDA Loan does allow them.  It looks ONLY at the credit report history of the borrowing spouse and does NOT even look at the credit history for the non-purchasing spouse.  So if YOUR credit qualifies and your spouse has a questionable credit report, you have the option of not including your spouse on the loan.

USDA Administrative Notice 4543 specifically states that the Non-purchasing spouses credit is NOT considered a reason to deny a USDA Loan application.

However Arizona is a community property state, so you 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 it works…

We will pull your credit and we will pull the credit of the non-borrowing spouse in order to determine the accurate debt for qualifying.  At closing, the non-borrowing spouse will NOT sign the note, but will sign the security instrument.

Apply for a USDA Loan Online Now: Loan Application

However since the USDA Loan does look at total household income in order to qualify under the income limits, you would need to provide the full income documentation for the non-borrowing spouse.

On the other side of this equation, even though you are providing income documentation for your spouse, you would need to qualify for the loan on your own.  A non-purchasing spouse’s income is only looked at to determine eligibility under the income limits, not for qualifying for the new loan.

This is yet another handy advantage 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 above and ask for a quote.  If you want to go ahead and get your application in, you can fill out my Arizona Home Loan Application Online here.

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