The Federal Housing Administration, or FHA, has long championed the efforts of Americans purchasing their first home. The government agency's flexible underwriting guidelines combined with a minimal down payment requirement of 3.5 percent, give credit-challenged and cash-strapped borrowers the chance to become homeowners. FHA also helps seasoned borrowers. Applicants who already own a home or have a spouse that owns a home may still qualify for FHA financing under certain circumstances.
FHA insures mortgages made by approved banks and mortgage lenders, protecting them from homeowner default. It pays claims to lenders if the borrower does not fulfill the loan obligation. FHA underwriting guidelines for its most common insurance, Section 203b, are available in the Department of Housing and Urban Development, or HUD, Handbook 4551.1 for single-family dwellings.
A spouse's right to real estate owned by her spouse is determined by state law. Community property states grant a one-half interest to spouses for property acquired during marriage. Regardless of whom a property legally belongs to, FHA considers all homes currently owned by a borrower or her spouse as a way to ensure that FHA insurance will be used on a principal residence.
The application process for FHA insurance requires all borrowers to list any real estate they own. In the event a married woman qualifies for an FHA refinance or purchase without her spouse, FHA requires a background check, including a credit history report, of the non-applicant spouse to identify any liens, judgments or derogatory credit that may affect title on the subject property. A wife may not purchase or refinance a home without FHA's knowledge of her husband's mortgage obligations within the U.S..
A borrower may qualify to purchase or refinance a primary residence despite her husband's interest in other real estate under certain circumstances. These circumstance include if the husband's home serves as a secondary residence or rental property upon completion of the FHA transaction; the couple is separated or divorcing and the applicant spouse will occupy the FHA home; or the couple must move due to an increase in family size or a job relocation to an area that lacks adequate rental housing within reasonable commuting distance. Also, if the husband is in the process of selling an existing property, the wife may qualify for FHA insurance, with sale of the husband's home as a condition of FHA endorsement.
In general, FHA insurance is for owner-occupied properties. Generally, FHA will not have a problem with a wife purchasing a property on her own, as long as she meets credit and income requirements, and she intends to live in it for the majority of the calendar year. The borrower's motive for purchasing another home may be called into question if the husband's home is near the subject property, bigger or more desirable than the subject property or they cannot demonstrate substantial need for the FHA-insured home. A written explanation from the borrower may be necessary by the underwriter. Ultimately, the lender is responsible for discerning whether the subject property is for use as a principal residence.