Home Purchase During Divorce Process Mortgage Guidelines

This BLOG On Home Purchase During Divorce Process Mortgage Guidelines Was UPDATED On February 21st, 2019

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 explanations and provide more documents than normal
  • Remember, that home purchase during divorce process will require the 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

Home buyers who made up mind and want to purchase a home during divorce process they need to make sure to disclose this fact to mortgage loan originator

  • The mortgage loan originator will find out what 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 needs 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 needs to be provided
  • 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, need proof that borrower is not responsible.  Need to provide home was awarded to ex-spouse. Proof that 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 ex-spouse is making mortgage payments on 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 this co-mingled funds to pay a debt and will count it against the borrower
  • It is highly recommended to take off name out of a mortgage on a home that was awarded to 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 it on 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 explanations
  • 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

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