FHA Loan Rules For Non-Purchasing Spouses

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.”

But these rules also extend into the FHA loan application approval process–in some cases a non-purchasing spouse may have his or her financial obligations reviewed as part of the loan approval process.

• borrower resides in a community property state, or
• property being insured is located in a community property state.”

The rules do add, “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.”

In the cases where a non-purchasing spouse’s debts must be added to the borrower’s debt-to-income ratio, FHA loans stipulate that “A credit report that complies with the requirements of HUD 4155.1 4.C.2 must be provided for the non-purchasing spouse in order to determine the debts that must be counted in the DTI ratio. Note: This requirement is applicable if the subject property or the borrower’s principal residence is located in a community property state.”

The most obvious question for some borrowers at this point is “Do I live in a community property state?” The answer is found with your local authority such as the county courthouse. A participating FHA lender can also help borrowers determine what may be required of them in that zip code. It’s important to remember that not all state laws are the same–what may be acceptable in one state may not carry over into another.

It’s best to research your options in this area to know exactly what may be expected of you at loan application time where community property laws are concerned.

Do you have questions about FHA home loans? Ask us in the comments section.