Community property states (such as Arizona) complicate the FHA mortgage process for some married home-buyers. In a community property state, a non-purchasing spouse’s debts are held against the purchasing spouse on an FHA loan. Talk about sparking interesting table talk!
Adding insult to injury, the rule goes on to say a non-purchasing spouse’s income is not usable on an FHA loan. However, a detour around this rule exists for Arizonans. That’s right, a non-purchasing spouse’s debt is not always held against a purchasing spouse.
Excluding Pre-Marital Debt on an FHA Loan
What can you do when your spouse came with a judgment, maxed out credit cards and an outrageous car payment? Before saying “next time run credit before “I do,” there’s a better option. In Arizona, community property law says that debts acquired before marriage are not the other spouses responsibility. As a result, the non-purchasing spouse’s pre-marital debts do not count against the purchasing spouse on an FHA loan.
Your FHA lender’s interpretation of community property laws in your state is crucial. An an FHA loan approval may depend on it. Arizona law clearly state each spouses pre-marital debt belongs to them. It is not the responsibility of their spouse. In other words, their spouses FHA loan application does not include their pre-marital debt. Married couples in Arizona applying for an FHA home loan have more flexibility than they may have thought.
By Jeremy house