If you happen to live in a “community property” state and you want to get an FHA loan, there are certain rules that apply.
Community Property States and FHA Loans
Except for the obligations specifically excluded by state law, the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios on FHA loans where the borrower resides in a community property state or the property to be insured is located in a community property state.
Although the non-purchasing spouse‘s credit history is not to be considered a reason for credit denial, a credit report must be obtained for the non-purchasing spouse in order to determine debts under the non-purchasing spouse’s name and included in the debt-to-income ratio.
Tax liens or judgments in the non-purchasing spouse’s name must be paid in full unless documentation is provided from an attorney showing the tax lien or the judgment would never go against our borrower. Repayment plans set up on judgments are allowed, as long as the purchasing spouse is qualified with the monthly obligation.
The non-purchasing spouse does not need to sign the mortgage deed or note. However, it is required for the non-purchasing spouse to sign the security instrument or any other documentation, such as a quit claim deed, required to evidence that the spouse is relinquishing all rights to the property, if the spouse’s signature is necessary (under applicable state law) to waive any marital property right he or she has by virtue of being the applicant’s spouse.
Community Property States
The following are considered “community property states”:
- New Mexico