Study Finds Partner’s Low Credit Score Can Raise Home Payments by $437 Monthly

A recent study by Mortgage Research Network highlights the significant financial impact of purchasing a home with a partner who has a low credit score. The findings indicate that a co-applicant with sub-optimal credit can increase monthly mortgage payments by an average of $437, with the total cost difference reaching nearly $63,000 over a 12-year homeownership period. This increase results from higher interest rates, elevated mortgage insurance premiums, and more expensive homeowners insurance.

The study categorizes good credit as a score of 760 or higher and low credit as below 640. Nationally, adding a co-applicant with a low credit score raises home payments by an average of 14.4%. The impact is particularly notable in markets like San Antonio, where the average home price is approximately $260,000, and monthly payments can rise over 18% when one partner has a low credit score.

Besides the financial implications, research from the Federal Reserve suggests that credit score disparities between partners may correlate with relationship stability. A significant credit score gap has been associated with a higher risk of separation, while couples with better credit scores tend to experience longer relationship durations. This correlation may relate to the reflection of trustworthiness and financial responsibility embodied in credit scores.

For insurance and lending professionals, these findings underline the importance of assessing borrower profiles holistically, considering both partners’ credit standing to accurately gauge risk and pricing. Additionally, the study offers insights into consumer behavior and relationship dynamics that could affect credit risk evaluations and product offerings.

This analysis underscores the broader insurance and mortgage market implications of credit score variations within joint applicants. Industry players should be attentive to these factors when structuring loans, underwriting insurance products, and advising clients in joint financial decisions.