June 19, 2014
A reader asks, “I have awesome income and FAIR Credit. My wife has Excellent Credit and low income. Can we qualify for a FHA mortgage with my income and her credit if we both apply? I live in Texas a community property state.”
FHA loan rules governing creditworthiness and FHA loan approval are found in HUD 4155.1 Chapter Four Section A. It states, “When determining the creditworthiness of borrowers, coborrowers, or cosigners, the underwriter considers their
• income
• assets
• liabilities, and
• credit histories.”
This may prove a problem for borrowers who have insufficient credit scores according to FHA or lender standards. The above quote from the FHA loan rulebook implies that the lender must consider credit and income from both parties.
In the case of a community property state, the laws of that state may require that both spouses include income data together for the purposes of loan approval. Or the state may have other ways of handling the issue–it all depends on the state.
According to FHA loan rules, borrowers with credit scores about 580 are eligible for maximum FHA financing.
However, the lender may have higher requirements, so the answer to this reader question basically depends on individual circumstances and the lender’s rules for loan approval.
It’s important to remember that FHA loan credit standards aren’t the only ones at work–the lender is free to add to or require stricter standards of creditworthiness as long as those standards are applied in accordance with federal laws such as the Fair Housing Act.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get 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.
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