Lenders don't neglect your loan application, whether you are married or divorced. Unfortunately, if you become a widow, even then they can't ignore your application for this reason. But your marital status has a big effect on your ability to qualify for a loan. If your spouse has low credit score or outstanding debts, it could damage your chances to qualify for a mortgage loan. If you're divorced and paying the alimony to your ex, the lender can reduce the loan amount for the reason.
Check out how your marital status can build or destroy your ability to qualify for a home loan:
a. Married - Married couples have huge flexibility at the time of applying for a mortgage. Spouses can join their income if they apply for a loan together. The lenders may approve their application for a larger loan due to their combined income.
Being married can cause problems too. At the time of application, your lender will only consider the lowest middle score between both of you. For example, if you’ve FICO credit scores of 760, 720 and 700, but your partner has 680, 520 and 660, the lender will only consider the score 620 while determining your qualification and interest rate:
Keeping this in mind, you need to decide whether you’ll apply for the mortgage loan together or not. If your spouse has a very low credit score, it’ll not be a good idea to jointly apply for a loan. The reason is that the lender might unapprove the loan application as one of the credit score is below their expectation.
b. Divorced - Lenders don't appreciate being divorced at the time you apply for a mortgage loan. Lenders normally check your income and debts. It means they’ll select the only party who can afford a mortgage.
These regular payments will factor into your debt-to-income ratio. Lenders will consider that your total monthly debts (including your new mortgage payment) should be equal but not more than 43% of the gross monthly income. If you add child-care and alimony payments along with it, your DTI will be increased. Then you might have difficulties to find a lender who’ll agree to approve your loan application.
If you are getting every alimony payments each month, you can utilize this amount as an “income” and help yourself to qualify for a mortgage loan. You need to get these payments for at least 6 months and the payments must be scheduled to continue for at least next 3 years from your spouse.
c. Single - Being single isn't a bad thing. As long as you’ve sufficient funds to support yourself, you can qualify for a loan. But unlike a married couple, being a single person, you don’t have the facility to add another borrower's income to help you to qualify for the big mortgage loan.
But single buyers aren’t totally losers. Being a single buyer, you can add a co-signer, usually a relative - to support you financially. In such a situation, your co-signer must agree to pay for the mortgage installments on your behalf if you fail to do so. This reduces the headache of the lenders, regarding the monthly payment continuation.
But single borrowers must be careful also when adding a co-signer. If somehow you miss your payments, your co-signer will get a hit on his credit. If you, by any reason stop paying your part of the money, then your co-signer may also stop the payments.
There must be an understanding that both of you will be responsible for paying the monthly mortgage payments. If one of you is facing any kind of financial hardships, like a financial crunch or unemployment or death, the other will be responsible for the due payments.