The question is reprinted below followed by the answer.

I am applying for an FHA loan with my fiancee who is divorced and still owns a home with his ex-wife. The divorce decree says that this ex-wife is responsible for the mortgage payments and the house is to go on the market when their son turns 18.

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However, our mortgage broker says for us to qualify for a FHA loan, HUD requires that his name is off the deed.

Is that true? If my finance takes his name off the deed, he will lose money he put into the house when the time comes for his ex-wife to sell.

My answer:

I do believe that is true. In order to qualify without including the housing payment for the home he has with his ex wife, you have to produce the divorce decree showing the ex wife is responsible for the payment and the title has been transferred. So, he will have to be quit claimed off the property.

Here is what HUD says in their 4155 Handbook about qualifying for an FHA loan with a divorce. “A borrower may be eligible if the divorce decree or legal separation agreement awarded the property and responsibility for payment to the former spouse.”

It also continues to say the mortgage has to be current within the last 12 months or at a 75% loan to value.

This is for automated underwriting. Should the fha loan have to be manually underwritten, different requirements may be needed by the underwriter.

As far as the equity in the home with the ex wife, the divorce decree stills stands that your fiancé gets however much equity they agreed to when the home is sold. It doesn’t matter if he is on title or not.

But I am no lawyer. Be sure to contact an attorney about any legal issues.

Thanks for the question…

Good Luck!


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