Will my spouse’s foreclosure be counted against me?  The answer will depend on whether or not your name appears on the title.  If your name is on title, then the foreclosure will be counted against you.  This is regardless of whether or not your name is on the note.  Frequently a married couple will purchase property using only one spouse’s credit and only that spouse will sign the note.  While only the spouse who signs the note is obligated to pay back the loan, if you live in a community property state such as Texas and both spouses name are on the title, then the bank will foreclose against both spouses.

Also, although this foreclosure will not appear on your credit report, your name will be included in the Notice of Default (NOD).   Practically all lenders will pull a NOD and other reports on properties the borrower resided at.  So even if you get an initial loan approval, the likelihood of your file making it through underwriting is slim.  Further, there are two questions on the Declaration Section of the 1003 Residential Loan Application that the borrower must answer pertaining to foreclosure: “Have you had property foreclosed upon or given title or deed in lieu of foreclosure in the last 7 years?” and   “Have you directly or indirectly been obligated on any loan which resulted in foreclosure, transfer of title in lieu of foreclosure or judgment?   The borrower will have to answer “yes”or he/she would be committing mortgage fraud.  So even in the unlikely event your file made it through underwriting, the loan could still come back to haunt you at some point in the future if you answered “no” to those questions.

Therefore, unless your spouse has sole and separate property and your name does not appear on title, your spouse’s foreclosure will be counted against you.  You will need to wait the required 3 years to get a FHA loan and 4 years for a conventional loan or do some form of none prime/hard money loan.