FHA Home Loans and Non-Purchasing Spouses
October 4, 2023
When it’s time to apply for an FHA home loan, spouses often want to buy together--it’s a logical financial step for many couples, old and new. But not every couple comes to the FHA loan process with equal credit, employment history, or income.
There are a variety of questions these couples bring to the FHA loan process. Can the FICO scores of one spouse make up for the lower scores of the other borrower? Can one spouse’s income offset the lower income of the other?
Some other questions don’t come up until later. For example, how do the laws of your state affect your financial affairs as a couple? Do those “community property” laws factor in to how your FHA loan application is reviewed and processed?
Those are all very important questions, but what about the opposite situation--one where only one spouse is applying? Does an FHA loan require action, data, or paperwork on the part of a non-borrowing spouse?
State law, lender standards, and FHA loan regulations may all factor into the answer, depending on circumstances. At the time of this writing, FHA loan rules that govern non-purchasing spouses can be found in HUD 4155.1 Chapter Four, Section A, though as of September 14th, those rules will be found in a new volume called HUD 4000.1. At the time of this writing, FHA loan rules state:
“If required by state law in order to perfect a valid and enforceable first lien, a non-purchasing spouse may be required to sign either the security instrument or documentation indicating that he/she is relinquishing all rights to the property. When the security instrument is executed for this reason, the non-purchasing spouse is not considered a borrower, and not required to sign the loan application.”
Does the non-borrowing spouse (who does not sign the mortgage note) have any ownership in the home once purchased? FHA loan rules state clearly:
“Non-applicant individuals can have an ownership interest in the property at the time of settlement without executing the mortgage note and security instrument, regardless of whether the transaction is a purchase or a refinance.”
These rules do include certain considerations, depending on circumstances:
“Except for obligations specifically excluded by state law, the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios, if the borrower resides in a community property state, or property being insured is located in a community property state.”
Again, state law often factors into these types of applications--be sure to speak to your loan officer to learn how community property laws could figure into your FHA mortgage loan or refinance loan application. FHA loan rules will never override federal, state or local ordinances.
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There are a variety of questions these couples bring to the FHA loan process. Can the FICO scores of one spouse make up for the lower scores of the other borrower? Can one spouse’s income offset the lower income of the other?
Some other questions don’t come up until later. For example, how do the laws of your state affect your financial affairs as a couple? Do those “community property” laws factor in to how your FHA loan application is reviewed and processed?
Those are all very important questions, but what about the opposite situation--one where only one spouse is applying? Does an FHA loan require action, data, or paperwork on the part of a non-borrowing spouse?
State law, lender standards, and FHA loan regulations may all factor into the answer, depending on circumstances. At the time of this writing, FHA loan rules that govern non-purchasing spouses can be found in HUD 4155.1 Chapter Four, Section A, though as of September 14th, those rules will be found in a new volume called HUD 4000.1. At the time of this writing, FHA loan rules state:
“If required by state law in order to perfect a valid and enforceable first lien, a non-purchasing spouse may be required to sign either the security instrument or documentation indicating that he/she is relinquishing all rights to the property. When the security instrument is executed for this reason, the non-purchasing spouse is not considered a borrower, and not required to sign the loan application.”
Does the non-borrowing spouse (who does not sign the mortgage note) have any ownership in the home once purchased? FHA loan rules state clearly:
“Non-applicant individuals can have an ownership interest in the property at the time of settlement without executing the mortgage note and security instrument, regardless of whether the transaction is a purchase or a refinance.”
These rules do include certain considerations, depending on circumstances:
“Except for obligations specifically excluded by state law, the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios, if the borrower resides in a community property state, or property being insured is located in a community property state.”
Again, state law often factors into these types of applications--be sure to speak to your loan officer to learn how community property laws could figure into your FHA mortgage loan or refinance loan application. FHA loan rules will never override federal, state or local ordinances.
------------------------------
RELATED VIDEOS:
You're Almost There When You Get Your Loan Approval
Learn About the Mortgage Insurance Premium (MIP)
Pre-approval Starts the Mortgage Process
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