Home Purchase During Divorce Process Mortgage Guidelines
This Article Is About Home Purchase During Divorce Process Mortgage Guidelines
Couples who are undergoing a divorce can qualify for a mortgage after their divorce has been finalized. It is difficult to qualify for a mortgage while the divorce process is not finalized. Lenders need to see the final divorce decree in order to fully underwrite the mortgage loan. In cases where one spouse gets to keep the house, the mortgage underwriter needs to see the judge’s order in the divorce decree. The divorce decree may state one spouse keeps the house but need to remove the other spouse from the deed and mortgage. Therefore, the spouse keeping the home will need to refinance the other spouse off the current mortgage and get a new mortgage. In this article, we will discuss and cover the home buying process during a divorce proceeding and how it works.
Getting A Mortgage During And/Or After Divorce Proceedings
Divorces are a fact of life and it happens to many of us. Getting a residential mortgage loan does not have to be stressful. But the stress can be added many times over for homebuyers who are going through a home purchase during divorce process. Buying a home during divorce process is not recommended. But there are situations where it is necessary. Buying a home during divorce process can be done. However, be prepared to write many letters of explanation and provide more documents than normal. Remember, that home purchase during divorce process will require cooperation from both parties. Both parties might have to be at the closing table together, depending on the circumstances. It is best to be as civil as possible with one another if going through a home purchase during divorce process.
First Stage: Home Purchase During Divorce Process
Homebuyers who made up mind and want to purchase a home during divorce process need to make sure to disclose this fact to the mortgage loan originator. The mortgage loan originator will find out his mortgage company’s guidelines for borrowers who are going through mortgage during the divorce process.
The lender will probably ask the borrower to provide the divorce decree or settlement agreement for items not reporting on the credit report:
- Such as child support payment agreements
- Alimony payments
- Asset settlement agreements
- Debts of both parties need to be separated and proof provided
Child Support And Alimony
Home Buyers who are or will be receiving child support or alimony income can use this type of income as qualified income. However, it needs to continue for the next three years to be able to use child support and alimony income as qualified income. A child support and/or alimony agreement and terms of the agreement need to be provided. For borrowers who are obligated to pay alimony and/or child support payments, the payments will be used as part of monthly expenses. This will be used in calculating debt to income ratios.
Proof Of Mortgage Payments For Past 12 Months
In the event borrower is on a mortgage with an ex-spouse, needs proof that the borrower is not responsible. Need to provide home was awarded to ex-spouse. Proof that the ex-spouse has been paying on the mortgage for the past 12 months (proof provided by the ex-spouse providing 12 months canceled checks to mortgage company), the mortgage payment will not be used to calculate your new debt to income ratios. It is not a wise choice to have a joint bank account after the final divorce. If the ex-spouse is making mortgage payments on an ex-home with a joint bank account with the name still on it, the borrower will be liable for half of the mortgage liability since the name is still on it. The new mortgage lender will consider these co-mingled funds to pay a debt and will count it against the borrower. It is highly recommended to take off the name out of a mortgage on a home that was awarded to an ex-spouse. Have ex-spouse refinance it out of the name and into their name solely. This way, if they are ever late on paying their mortgage payment, it will not reflect on the credit report.
Home Purchase During Divorce Process: Both Parties May Need To Come To Closing Table
Home Buyers intending on a home purchase during the divorce process without divorce being finalized, the lender may require a marital settlement agreement signed by both parties and approved by the courts. It is a good idea to separate assets as soon as possible and provide detailed letters of explanation. Both parties need to be civil with one another. Both parties will need to be at the closing table. Those still legally married, the ex-spouse may need to sign off on the rights to the home at closing.