non purchasing spouse question

[Anonymous]

so my husbabnd and i are in contract on a house and i am NOT going to be on the loan becasue my credit scores arent good and i have no income he is the only one working. when we went to get pre approved they said they needed to use my debt to add to the debt to income ratios, but i will not be on the loan/mortgae. now im just wondering if we might have to end up paying off my collections before closing? Even though im not going to be on the loan.. my first guess in no becasue im not "purchasing" the house with him but im not entirely sure becasue they did add my debt to his ratios. so now im stumped. i will ask our broker this when we go in to get the good faith estimate and alll that coming up. jsut wondering becaue of all the new guidelines stating collections need to be paid off just hoping MINE doesnt   anyone with info? thank u

[Anonymous]

Is "your debt" in both of your names? If you aren't on the loan and your debt is just in your name in it shouldn't be figured in I would think...

[JenniferinFL]

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@Anonymous wrote:

so my husbabnd and i are in contract on a house and i am NOT going to be on the loan becasue my credit scores arent good and i have no income he is the only one working. when we went to get pre approved they said they needed to use my debt to add to the debt to income ratios, but i will not be on the loan/mortgae. now im just wondering if we might have to end up paying off my collections before closing? Even though im not going to be on the loan.. my first guess in no becasue im not "purchasing" the house with him but im not entirely sure becasue they did add my debt to his ratios. so now im stumped. i will ask our broker this when we go in to get the good faith estimate and alll that coming up. jsut wondering becaue of all the new guidelines stating collections need to be paid off just hoping MINE doesnt   anyone with info? thank u

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That doesn't sound right. My husband is buying a home just in his name because my credit isn't great. They haven't asked a single question about my debt, only for a letter of explanation for why I'm not working.

[Anonymous]

Depends on the state... In Texas, a common law state, the debts of both are considered in the DTI, even though the credit report contents are otherwise ignored (i.e. the collections themselves shouldn't need to be paid). However, I suspect that some collections - especially those that are within SOL - to hit some snags in UW.

[PRC]

Do you live in a community property state?  If so if you're applying for an FHA loan they will also include your debt in their calculations for DTI.  They will not include your scores so I'm guessing the collections won't count only your currently open and active accounts.  If you're applying for a Conventional loan they won't pull your report.  I am going through the same thing and this is what my LO told me.

[namvet]

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@Anonymous wrote:

so my husbabnd and i are in contract on a house and i am NOT going to be on the loan becasue my credit scores arent good and i have no income he is the only one working. when we went to get pre approved they said they needed to use my debt to add to the debt to income ratios, but i will not be on the loan/mortgae. now im just wondering if we might have to end up paying off my collections before closing? Even though im not going to be on the loan.. my first guess in no becasue im not "purchasing" the house with him but im not entirely sure becasue they did add my debt to his ratios. so now im stumped. i will ask our broker this when we go in to get the good faith estimate and alll that coming up. jsut wondering becaue of all the new guidelines stating collections need to be paid off just hoping MINE doesnt   anyone with info? thank u

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You do not need to be part of the mortgage loan application.  Your husband will qualify on his income, credit and debts.  You will just sign the deed at closing.  My experience is in Texas which is a community property state.

[PRC]

Copied the below from the FHA website:

What is a 'Non-Purchasing Spouse?'

First-time home buyers who want an FHA mortgage will learn about a variety of requirements which must be met to qualify for an FHA home loan. Some are set by the financial institution, some by FHA rules, and some are required by state law.

State laws governing FHA loan application procedures may vary greatly depending on where you live. Did you know in some states a non-purchasing spouse may still have to sign FHA loan paperwork in order for you to qualify for an FHA loan? The spouse may also have to go through a credit check even though they aren't co-signing or co-borrowing.

This is usually true when state law requires it when the applicant is trying to get an FHA loan on a first mortgage. Fortunately, the non-purchasing spouse’s signature is required only to acknowledge in writing that the spouse has no claim on the property. The signature also indicates the spouse is not a borrower and not required to sign the loan contract.

In addition to the signature requirement, in some cases the spouse’s debts must be considered in what FHA home loan paperwork describes as the borrower’s “qualifying ratios”. This information is used to determine the borrower's debt-to-income ratio. You'll find this common in states with “community property” laws where each spouse is entitled and liable for half of all property held in common in the marriage. Community property states have laws making each partner liable for a portion of the other’s debts.

When the non-purchasing spouse must submit to a credit check FHA loan rules dictate that bad credit reports on the non-purchasing spouse can’t be used to deny an FHA mortgage to the borrower, but the credit check is required nevertheless.

It’s important to understand that in these cases, the rules apply as long as you are legally married, regardless of circumstance. Even if you are planning a divorce, the non-purchasing spouse's signature is required unless otherwise specified by state law. Some states may offer some form of relief for people getting divorced; otherwise even if you are legally separated, about to finalize a divorce decree or see the judge, until you are no longer legally married you must still submit the non-purchasing spouse’s signature on the required documents.

Where applicable, FHA loan non-purchasing spouse signature requirements are for first liens. According to the FHA, in all other situations the spouse's name or signature not appear on the loan documentation. Non-purchasing spouses do not get title to the property bought with an FHA home loan once the loan is paid in full. That's not just important for looking ahead to making a final payment, it may also apply when refinancing. Ask your loan officer for full details about how your state laws affect your FHA loan paperwork in this area.

Hope this helps

[drkaje]

Makes sense, especially in a community property state.

[tooleman694]

I am going thru this right now. I am buying a house without my Wife on the loan.

They pulled her credit and added all of her active debts against our DTI minus her income. I think it is complete BS.

If we went conventional, they wouldn't pull this BS.

[drkaje]

Should loan officers warn people about these things?

Maybe I've been on the forums so long that lender asking about household DTI doesn't seem surprising.