Question: My boyfriend and I have found the perfect "starter home". The price is $250,000 and we have over $50,000 in savings so we can make a twenty percent down payment. Upon making loan application, we discovered that we couldn't qualify for the $200,000 loan because my boyfriend's credit score is 575. Two years ago he had a difficult time and defaulted on several credit cards. My credit score is 720. My salary is $30,000 and my boyfriend makes $50,000. The only debt we have is my $240 car payment. We both feel very disappointed that we can't get a loan. Do you have any suggestions?

Answer: A low credit score is one thing that can kill a loan application. And I can tell you that a credit score of 575 isn't pretty. I'm afraid your boyfriend's score can indeed make it difficult for him to get a loan at a decent rate. But on the other hand, there are ways around this problem.

But first let me explain a "credit score". Several years ago, the three national credit repositories devised a statistical model to measure one's credit risk. The model takes into consideration such things as payment history, amount of debt, and amount of available credit. The lower the score, the higher the risk. The higher the score, the lower the risk. Scores over 700 are considered excellent, while scores under 600 are considered quite poor. So it's no wonder your loan officer is balking at your boyfriend's credit report.

Let's think outside the box. Your loan application has a lot of strengths. The mere fact that you are able to put twenty percent down is reason enough for many lenders to make you a loan.

If I were your loan officer, the first thing I would do is run the numbers using only your income. Let's do that. With a twenty percent down payment on a $250,000 house, we're looking at a loan amount of $200,000. Using a fixed rate of 5.75 percent, we come up with a principal and interest payment of $1,167 per month. Adding an estimated amount for real estate taxes and hazard insurance of $250 and we have a total monthly payment of $1,417.

Lenders, as a rule of thumb, don't like to see your total monthly debt exceed 38 percent of your gross monthly income. Your annual salary of $30,000 is equal to $2,500 per month. Your house payment is $1,675, or about 56 percent of your income.

Does this mean you'll be rejected for the loan? Not at all. Sure, your debt-to-income ratio is high, and some lenders won't accept it, but you also have great credit scores and a large down payment. Most lenders are able to process applications through an automated underwriting system. And my guess is that the system will spit out an "Accept", which is akin to an approval, despite the 56 percent ratio.

If you can't secure an approval with a fixed rate, consider an adjustable rate mortgage (ARM). A five year ARM, for example, is fixed for the first five years. Since the rate can adjust after five years, the initial rate is lower, perhaps 4.50 percent. A lower rate means a lower payment, which means a lower and more acceptable qualifying ratio. In fact, a 4.50 percent rate would drop your ratio to about 50 percent.

As I said, there are ways to get around your problem. And my advice is to get approved for the loan on your own, put your boyfriend's name on the title only, and in a few years, with a good track record, his credit will be good as new.