Divorce makes you emotionally and financially vulnerable, with lots of difficult adjustments to make. And, if you're planning to buy a house for yourself, then life would be even more challenging since you've to face strict mortgage underwriting rules. But, don't lose hope because there are many divorcees in the country who have qualified for mortgage in the last few years.
How to try for a mortgage loans post divorce
Give a true picture of your financial situation to mortgage lenders. When you fill out the loan application, try to write down the correct details. This will help the lenders to structure your loan and make a fair credit decision. Show your divorce decree as well since lenders would like to know about your financial obligations that aren't reported on your credit report. This may include alimony, child support, spousal support, etc. Make sure you submit your divorce decree even if you've legally separated 20 years ago. There's no SOL period on mortgage loan underwriting.
What to do when you're receiving money through alimony
Are you receiving money in the form of alimony or child support? If yes, then this will be an added advantage for you. Money is money after all. Lender will regard this money as a part of your income. You can use it to be eligible for a mortgage under the following scenarios:
1. You've been receiving alimony or child support for the last 6 months
2. You'll continue to receive it in the next 3 years as well
In this case, you may show the alimony agreement where the terms and conditions have been given in details.
What to do when you're paying alimony
Well, this won't go in your favor since you've to pay a specific amount for alimony or child support. This will make a negative impact upon your borrowing ability also. This is mainly because debts drop income. You need to earn more in order to offset mortgage expenses.
What to do when you've joint credit card debt
This again will create a problem unless you can prove that your ex-spouse is responsible for paying off the credit card debt. You can show bank statements to establish your point. If you can't, then your financial obligation will have an impact on the lender's decision.
What to do when you have a joint mortgage debt
If you've the responsibility to pay off mortgage loan along with your ex-spouse, then try to look for the ways to refinance it. Try to convince your ex-spouse to refinance the loan in his/her name so that you don't have any financial obligation in future.
If your ex-spouse is ready to refinance the loan in his name, then get the HUD statement in your hand. This form is required to obtain the loan and eliminate the payment from the other house.
What to do when mortgage payments are made from a joint account
Here's the situation. As per the divorce decree, your ex-spouse has been awarded with the property. Both you and he are making the monthly mortgage payments from the same bank account. In this situation, you can hardly do anything. Both of you are equally responsible for the mortgage. The money is “co-mingled” funds and the payments are being made from the same place. You can't prove that your ex-spouse is responsible for the payments.
Useful tips to qualify for a mortgage post divorce
1. Understand the mortgage process from here. You're not single anymore. From now on, you've to do everything on your own.
2. Remove your ex-spouse from your joint bank accounts and credit card accounts.
3. Go through your credit report and find out if there is any joint debt.
4. Explore the popular lender directories in the web to begin the process.
5. Calculate your DTI ratio to get an idea about your borrowing capability.
The final tip will be to not buy a house in the midst of divorce proceedings. Even if you want a separate place of your own or a rental apartment, stay back with your soon to be ex-spouse. This will help both of you to save money. Let me remind you, every penny saved is a penny earned. You will need every penny of yours to buy a home later.