FHA Non-Purchasing Spouse

The FHA guidelines on a non-purchasing spouse are quite perplexing and unclear. They seem to vary on whether or not the home is in a community property state. Even with knowing this, the guidelines still are not clarified.

If the non-purchasing spouse is not on the loan or mortgage, why is their credit pulled?

Will the non-purchasing spouse go on the title or not?

Questions on this topic are asked all over the country and each one is answered differently. When FHA is contacted to get clarification on this matter they just send this extract from the 4155.

Nevertheless, what ever your interpretation of title and credit requirements for a “non-purchasing spouse” is, the only thought that counts is that of the underwriter and/or the closing instructions.

You may also contact a local loan officer in Mobile, Al. to get further information on any questions you may need answered.

Extract from the 4155

D. Non-Purchasing Spouses. If required by state law in order to perfect a valid and enforceable first lien, the non-purchasing spouse may be required to sign either the security instrument or documentation evidencing that he or she is relinquishing all rights to the property. If the non-purchasing spouse executes the security instrument for such reasons, he or she is not considered a borrower for our purposes and need not sign the loan application. In all other cases, the non-purchasing spouse is not to appear on the security instrument or otherwise take title to the property at loan settlement.

Where there are non-purchasing spouses who sign security instruments relinquishing their rights to the property pursuant to applicable state laws, these non-purchasing spouses do not have to sign the mortgage note. Signing the security instrument for such purposes does not make the non-purchasing spouse a co-borrower.

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 if 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 that complies with the requirements of paragraph 2-4 must be obtained for the non-purchasing spouse in order to determine the debt-to-income ratio.