June 24, 2016
A reader asks, “My husband is a co burrower on his mothers mortgage loan and he has been asking her to remove his name from it but she hasnt. The mortgage has affected his credit and has made it hard to get a home of our own. Can his name be removed from the mortgage or is this something we need a lawyer for?”
Before answering this question, let’s examine how the FHA defines the role of a co-borrower. Page 128 of HUD 4000.1 states:
“To be eligible, all occupying and non-occupying Borrowers and co-Borrowers must take title to the Property in their own name or a Living Trust at settlement, be obligated on the Note or credit instrument, and sign all security instruments. In community property states, the Borrowers spouse is not required to be a Borrower or a Cosigner. However, the Mortgage must be executed by all parties necessary to make the lien valid and enforceable under State Law.”
According to HUD 4000.1, a co-borrower may occupy the home, or function as a non-occupying co-borrower. In either case, the co-borrower may be eligible for a new FHA home loan under certain conditions.
“A non-occupying co-Borrower on an existing FHA-insured Mortgage may qualify for an FHA-insured Mortgage on a new Property to be their own Principal Residence” as long as “the Borrower is vacating (with no intent to return) the Principal Residence which will remain occupied by an existing co-Borrower” or does not currently reside in the original property purchased with an FHA mortgage.
To answer the reader question, it’s important to note that state law may have a lot to say about how to proceed in circumstances like the one mentioned by the reader. We don’t give out legal advice (we are not lawyers or legal experts and such advice is beyond the scope of this blog) and a co-borrower’s best option in these cases may be to discuss the situation with the lender to see what recourse is available.
Barring that, hiring a lawyer with expertise in areas like these is a good idea, and you may find that the lender recommends this course of action too, depending on circumstances.
It’s important to remember that when co-borrowing or co-signing on a mortgage loan, the co-borrower is entering into a legally binding contract with the lender. It never hurts to discuss options prior to committing to a loan-including scenarios where a co-borrower may need to purchase a home of their own or seek a remedy to satisfy a legal need. Knowing your options, rights, and responsibilities prior to signing the contract is important.
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.
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