April 27, 2016
One of the most common questions about FHA home loans involves who gets their credit reports reviewed in the application process. FHA home loans permit co-signers, co-borrowers, and non-occupying co-borrowers, and with so many options open to the applicant(s), it can be confusing when trying to figure out who will need to furnish what information in order to apply.
FHA loan rules in HUD 4000.1 instruct the lender on who is to have credit reporting data pulled. On page 171 we learn:
“The Mortgagee must obtain a credit report for each Borrower who will be obligated on the mortgage Note. The Mortgagee may obtain a joint report for individuals with joint accounts.”
But that’s not the only instruction to the lender. We also learn, “The Mortgagee must obtain a credit report for a non-borrowing spouse who resides in a community property state, or if the subject Property is located in a community property state.”
That is an important issue, as not all states are community property states. Do you know whether your loan is affected by such laws? It’s important for legally married couples to have a conversation with the lender to see whether community property laws will affect the transaction.
HUD 4000.1 also adds, “The credit report must indicate the non-borrowing spouses SSN, where an SSN exists, was matched with the SSA, or the Mortgagee must either provide separate documentation indicating that the SSN was matched with the SSA or provide a statement that the non- borrowing spouse does not have an SSN. Where an SSN does not exist for a non- borrowing spouse, the credit report must contain, at a minimum, the non-borrowing spouses full name, date of birth, and previous addresses for the last two years.”
And what kind of credit reports are required for an FHA home loan? Page 171 addresses this issue, too:
“The Mortgagee must use a traditional credit report. If a traditional credit report is not available or the traditional credit report is insufficient, the Feedback Certificate will show a Refer recommendation, and the Mortgagee must manually underwrite the Mortgage. The Mortgagee must obtain a Tri-Merged Credit Report (TRMCR) from an independent consumer reporting agency.” Credit reports cannot be passed to the lender through the borrower, or through a third party that is not a credit reporting agency.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple 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.
Browse by Date: