A quitclaim deed is a legal document that transfers ownership of real property. This deed is easily completed and recorded at a local registry of deeds. Quitclaims are most common when newlyweds purchase a home or when a loved one passes away and ownership of property transfers to a beneficiary. The Federal Housing Authority (FHA) insures many home loans for lenders, which often give favorable terms to borrowers and quit claiming a property secured by an FHA mortgage is certainly legal.
The Federal Housing Authority (FHA) insures some home loans for eligible borrowers. However, a quitclaim deed is used to transfer ownership of real property, not to transfer obligation on a mortgage contract. Therefore, while it is possible to file a quitclaim deed on a property with an FHA mortgage attached to it, it is not possible to use a quitclaim to change borrowers on an FHA (or any) mortgage loan.
FHA Mortgages & Quitclaim Issues
There are advantages to using an FHA mortgage for real property, however. If, for example, a young borrower wishes to purchase a home but does not have the requisite credit to qualify, that borrower can use a parent to qualify and then remove his parent once he has established his credit. Under normal circumstances, this often would have to involve a refinance and perhaps a change of ownership (via a quitclaim deed) on the deed of the home.
Quitclaim After FHA Mortgage
It is also possible to file a quitclaim deed after the mortgage has been signed and recorded at the registry of deeds. The quitclaim deed can add or remove owners from the real property. If, for example, you need to remove an ex-spouse or a family member, you can accomplish this with the consent of this party, a notary public and a completed, notarized and recorded quitclaim deed. All of this can be accomplished on an existing FHA-loan-secured property.
It is important to note that it is not necessary for a co-borrower on an FHA loan to be a vested owner on the real property. However, in most cases the co-borrower will want to be an owner on the property if she is obligated to the mortgage loan. This is important to note for families and FHA loans as the rules for federally insured mortgages are more flexible so as to help younger borrowers attain home ownership.
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