December 10, 2015
We get many questions about how an FHA home loan transaction might be affected by divorce. One of the latest involves a situation where the potential FHA loan applicant wants to apply during a divorce proceeding:
“I am currently in the process of legally separating/divorcing my husband. Once granted in court, I plan to apply for an FHA first home buyer loan to find a home for myself and our infant son. From what I am reading online, FHA may still require my husband to do a credit check, etc. However, my question is, if he and I are legally separated in the interim of divorce proceedings and live apart, will his income still be included in the total household limitations? On my own I qualify for both an FHA low and down-payment assistance; however, if he is included I will not.”
This question implies that FHA home loans have a feature that somehow benefits or provides an advantage for first-time home buyers. The FHA does not offer any such advantages or special incentives.
While an individual lender may offer such a program, no such first time home buyer advantage is available via the FHA single family loan program itself. The lender may have some kind of first time home buyer incentive for qualified borrowers, but that would be at the discretion of the lender.
The answer to this reader’s question depends greatly on state law. If the borrower resides in a community property state, those laws would play an important part in how the loan is to be handled.
No two community property states may have the exact same statutes on the books, so it’s impossible to tell (even when knowing which state the borrower lives in) what laws might apply and which ones might not in this case.
In cases where community property laws apply, the lender will likely require additional documentation from the borrower as to the current legal status of the borrower. The lender may also need to see any written agreements pertaining to child support, alimony or other types of payments if the recipient wants such payments to be counted as income.
The lender may require details on such payment agreements where the applicant is a payer–in cases where the debt to income ratio may be affected by additional financial obligations. HUD 4000.1 says of these payments:
“For Alimony, if the Borrowers income was not reduced by the amount of the monthly alimony obligation in the Mortgagees calculation of the Borrowers gross income, the Mortgagee must include the monthly obligation in the calculation of the Borrowers debt. Child Support and Maintenance are to be treated as a recurring liability and the Mortgagee must include the monthly obligation in the Borrowers liabilities and debt.”
Speak to a loan officer for additional information on these requirements.
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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