Applying For a Mortgage After Your Divorce? Here Are Some Things You Should Consider
Getting a new mortgage after your divorce can be a bit complicated. If you are "separated" or in the process of finalizing things it can be very difficult due to the "unknowns" of your debts, assets and obligations. Some states have "legal separation agreements" that make it a little easier if you are trying to buy before you are legally divorced. The difficultly factors in because you and your soon-to-be ex-spouse or ex most likely have a joint financial history that more than likely includes:
Lines of Credit
Credit Card Debts
As a result, getting a mortgage after a divorce with joint debt can make it tricky to find a new home mortgage loan. It can also leave your credit exposed if old loans/mortgages are not refinanced out of your name. Also, being “quick claimed” off a deed does not exclude you from being marked late should your ex not pay it timely. So, before you act on getting a new mortgage, here are a few situations that you should disclose with your loan officer first:
If your ex-spouse is keeping the marital home and is now responsible for making payments on a mortgage that you are also obligated to pay:
You will need to provide your lender with a fully executed court order/divorce decree that awards the property to your ex-spouse. Under most circumstances, with a fully executed court order, your lender can omit the mortgage payment from your debt ratio. However, without a court order you would need to provide 12 months of cancelled checks showing that your ex-spouse has made the mortgage payments from their own account, not your joint checking account. The mortgage payments will need to be made on time during this period as well. You will also want to explore the option of having your ex refinance you off the mortgage obligation.
If you receive or owe alimony/child support:
This income can be used to qualify you for a new mortgage, as long as it’s spelled out in the divorce decree. You will need to show proof that the income has been received for at least the past six months and it is going to continue for at least three years from the date of the closing on the new mortgage. Conversely, you are required to disclose any child support or alimony obligations you may have which could affect your qualification ratios. Unlike using child support as income, there is no minimum amount of time you have to be obligated to pay alimony or child support before it’s counted against you. As soon as you are obligated to pay or choose to pay either alimony or child support it has to be counted as a debt against your income.
If you have other joint obligations such as car loans, student loans and credit cards:
These liabilities will be factored into your ability to qualify for a new mortgage. That is, unless it can be documented in the court order/divorce decree that the other party is responsible for paying the obligation. Otherwise it would have to be supported by 12 months proof of payment by the other party showing that they make the payments.
If you are not yet divorced and are planning your future, you will want to create some sort of marital separation agreement. This will help your loan officer determine your options. It is also a good idea to separate your finances, which means opening up your own bank accounts and paying your financial obligations from own individual accounts. Some of the best divorce attorneys often over look lending rules that can make it painful for you down the road if the proper steps are not laid out and thought out in your decree. Also, keep in mind in the mortgage world we will more than likely need all the divorce docs to be signed and dated by the judge, so don't have your closing date the same date of your final court date because there is usually a 30 day waiting period (can vary from court house to court house) of receiving the final signed and stamped date from the judge.