August 14, 2014
When an individual borrower applies for an FHA home loan, the lender needs his/her employment data, pay stubs, and tax information. The lender will also pull copies of the applicant’s credit reports. But what happens when two people apply for the FHA loan together?
FHA loan rules are clearly spelled out for the lender when it comes to credit reports. HUD 4155.1 Chapter One Section C has instructions for the lender that include the following:
“A credit report submitted with a loan application must contain all credit information available in the accessed repositories. Additionally, for each borrower responsible for the debt, the report must contain all of the information available in the credit repositories pertaining to
• credit
• residence history, and
• public records information”
But the most important part of this section in terms of our question–what are the credit requirements when two borrowers apply for the FHA loan together, come in the line that follows:
“One report is required for each borrower. The lender may obtain a joint report for individuals with joint accounts.”
Both borrowers must credit-qualify for the FHA loan. But what about situations where an FHA borrower wants to apply for a home loan, lives in a community property state, and has a non-purchasing spouse? FHA loan rules on credit reports in this case are clear–a credit report for the non-purchasing spouse might be required, but:
“The non-purchasing spouse’s credit history is not considered a reason to deny a loan application. However, the non-purchasing spouse’s obligations must be considered in the debt-to-income (DTI) ratio unless excluded by state law.”
What we have here is a different situation than when two borrowers apply together for an FHA loan–in a community property state, the spouse’s financial obligations may be shared based on the legal status of the marriage. A non-purchasing spouse is in a different status than two borrowers applying for a loan together, but must still have financial information disclosed based on state law and FHA loan rules where applicable.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.
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: