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FHA Loan Answers: FHA Loan Applications, Separation, and Divorce

April 15, 2013


A reader asks, “I’m married, the current home is FHA loan under my husbands name only….can i buy a home for 120,000 under FHA to live in? If so, will they count my husbands debts against me getting the loan? We have agreed to live separate, stay married though, do they require legal separation?”

This question doesn’t have a one-size-fits-all answer for one very important reason. FHA loan rules go hand-in-hand with state community property laws. What does this mean? If a borrower is divorced, separated, or still legally married in a community property state, each spouse may be liable for all debts incurred during the marriage. In such cases, the FHA lender may be required to include both spouses on the FHA mortgage, run credit checks, etc. on both parties.

Any party legally obligated on the FHA loan in such cases would be bound by the FHA occupancy rules, credit requirements, etc. FHA borrowers who aren’t legally obligated on the current FHA loan would still need to credit qualify for a new FHA loan including debt-to-income requirements and other financial issues.

Child support, alimony, and similar payments could factor into a debt-to-income ratio calculation and it’s important to consider those items carefully when trying to budget for a new home.

Any borrower who does NOT live in a community property state and finds themselves in the situation mentioned in the reader question would only need to insure that he or she was not obligated on the original mortgage in any way. A qualified FHA loan applicant is free to apply for a new FHA loan. But if you already have one FHA mortgage under your name, the issue gets complicated.

Borrowers who are dealing with circumstances similar to the one in the reader question should contact their lawyer about the implications of state community property laws and whether or not it’s advisable or feasible to purchase a home in the current situation.

Do you have questions about FHA home loans? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

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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