September 16, 2015
We get lots of questions about FHA loans where spouses may or may not wish to apply for the loan together. Here’s one such recent question where the couple only wants to have one spouse apply for the mortgage:
“Can my wife be the only person on the mortgage? If so do you only use her income to qualify or can you use both incomes. I have a judgment on my credit, but I have more income then she does and that would give us more of a mortgage to work with.”
Unfortunately the answer to this question depends greatly on whether or not the couple reside in a state where community property laws apply. Community property laws, which vary from state to state where applicable, have a great deal to say about how a legally married couple go about sharing the debts incurred for the duration of the legal marriage. One state may have one set of requirements for spouse income, FICO and other financial qualifications with regard to entering into a major financial obligation, while other states may vary.
And then there are lender standards within those community property states to contend with. All that being said, let’s examine what the FHA specifically says about non-purchasing spouses.
“In community property states, the Borrowers spouse is not required to be a Borrower or a Cosigner. However, the Mortgage must be executed by all parties necessary to make the lien valid and enforceable under State Law.”
However, the lender would be required to include, “the debt of a non-borrowing spouse on the URLA if the Borrower resides in or the Property to be purchased is located in a community property state.”
Furthermore, “If the Borrower resides in a community property state or the Property being insured is located in a community property state, debts of the non-borrowing spouse must be included in the Borrowers qualifying ratios, except for obligations specifically excluded by state law. The non-borrowing spouses credit history is not considered a reason to deny a mortgage application.”
FHA loan rules now found in HUD 4000.1 give us that information, and a set of required documentation for non-borrowing spouses:
“The Mortgagee must verify and document the debt of the non-borrowing spouse. The Mortgagee must make a note in the file referencing the specific state law that justifies the exclusion of any debt from consideration.”
“The Mortgagee must obtain a credit report for the non-borrowing spouse in order to determine the debts that must be included in the liabilities. The credit report for the non-borrowing spouse is for the purpose of establishing debt only, and is not submitted to TOTAL Mortgage Scorecard for the purpose of credit evaluation. The credit report for the non-borrowing spouse may be traditional or non-traditional.”
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It’s designed especially for real estate websites–a widget that displays FHA loan limits for the counties serviced by those websites.
It is easy to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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