March 12, 2013
A reader asks, “If my husband has a judgement against him from an old credit card debt, can we put the house in my name and use my credit only and still get approved? Or will they check him at some point anyway and reject me because of his judgement?”
The answer to this reader question can be complicated. A married FHA loan applicant who is not affected by community property laws in his or her state may be able apply for an FHA loan without the participation or financial obligation of the spouse. As long as state laws don’t state otherwise, a married FHA loan applicant should be able to apply for an FHA guaranteed mortgage without obligating anyone else on the loan.
In cases where more than one applicant may be financially obligated on the loan, all those to be obligated are subject to credit checks, income verification, etc. The usual rules for home loan underwriting apply where appropriate. What should all FHA borrowers know about credit standards, delinquent accounts and credit judgments? For multiple borrowers, the following standards apply according to the FHA loan rulebook, HUD 4155.1:
“The lender must document the analysis of delinquent accounts, including whether late payments were based on a disregard for financial obligations, an inability to manage debt, or factors beyond the borrower’s control, such as delayed mail delivery, or disputes with creditors.”
Also:
“Minor derogatory information occurring two or more years in the past does not require an explanation. Major indications of derogatory credit, such as judgments, collections, and other recent credit problems, require sufficient written explanation from the borrower. The explanation must make sense, and be consistent with other credit information in the file.”
The mere existence of negative credit information might not be grounds to deny the loan, but as stated in HUD 4155.1, the borrower will need to furnish more information to assist the lender in making the right call.
Do you have questions about FHA home loans? Ask us in the comments section.<
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: