FHA Loans, Spouse Co-borrowers, and Bankruptcy
July 6, 2015
We get a great many questions about when and how it might be possible to get an FHA home loan following a bankruptcy or foreclosure. Here’s one variation on that theme:
“I am a first time buyer. My income is currently between 45k to 50k a year. I understand I qualify for an FHA home loan based on my income and FICO score. My question is, since my wife did bankruptcy last year , can I include her in the loan for our first home?”
Reader questions like this are a reminded that not everyone is fully aware that state law can affect how you apply for a home loan, especially for those FHA loan applicants who live in states with community property laws.
Community property laws govern how new debts are incurred once a couple gets legally married. While FHA loan rules in HUD 4155.1 do address mortgage loan approval rules in general, state laws supplement FHA loan rules, and the FHA loan rulebook cannot override the laws of a community property state.
FHA loan rules in HUD 4155.1 state that all borrowers must credit qualify for the FHA home loan.
“A credit report submitted with a loan application must contain all credit information available in the accessed repositories. Additionally, for each borrower responsible for the debt, the report must contain all of the information available in the credit repositories pertaining to
A co-borrower who has filed bankruptcy is required to wait out a seasoning period before he or she can apply for another FHA home loan. This seasoning period varies depending on circumstances, the type of bankruptcy, and whether the borrower has re-established good credit and credit patterns since the bankruptcy.
In short, there’s no single answer to this question. Borrowers will need to confer with a participating FHA loan officer to see what might be possible for an FHA home loan with a spouse who has filed bankruptcy--if community property law, the lender’s willingness to issue a loan in such cases, and the borrower’s financial qualifications all line up, an FHA home loan may be possible.
“I am a first time buyer. My income is currently between 45k to 50k a year. I understand I qualify for an FHA home loan based on my income and FICO score. My question is, since my wife did bankruptcy last year , can I include her in the loan for our first home?”
Reader questions like this are a reminded that not everyone is fully aware that state law can affect how you apply for a home loan, especially for those FHA loan applicants who live in states with community property laws.
Community property laws govern how new debts are incurred once a couple gets legally married. While FHA loan rules in HUD 4155.1 do address mortgage loan approval rules in general, state laws supplement FHA loan rules, and the FHA loan rulebook cannot override the laws of a community property state.
FHA loan rules in HUD 4155.1 state that all borrowers must credit qualify for the FHA home loan.
“A credit report submitted with a loan application must contain all credit information available in the accessed repositories. Additionally, for each borrower responsible for the debt, the report must contain all of the information available in the credit repositories pertaining to
- credit
- residence history, and
- public records information.”
A co-borrower who has filed bankruptcy is required to wait out a seasoning period before he or she can apply for another FHA home loan. This seasoning period varies depending on circumstances, the type of bankruptcy, and whether the borrower has re-established good credit and credit patterns since the bankruptcy.
In short, there’s no single answer to this question. Borrowers will need to confer with a participating FHA loan officer to see what might be possible for an FHA home loan with a spouse who has filed bankruptcy--if community property law, the lender’s willingness to issue a loan in such cases, and the borrower’s financial qualifications all line up, an FHA home loan may be possible.
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