Home Purchase During Divorce Process: Not good!!!
Divorces are a fact of life and it happens to many of us. Getting a residential mortgage loan is extremely stressful but the stress can be added many times over if you are going through a home purchase during divorce process. Home purchase during divorce process is not recommended but there are situations where it is necessary. Home purchase during divorce process can be done, however, be prepared to write many letters of explantions and provide more documents than normal. Remember, that home purchase during divorce process will require the cooperation from both parties and the 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 you are going through a home purchase during divorce process.
First Stage: Home Purchase During Divorce Process
If you have made up your mind and want to purchase a home during your divorce process, you need to make sure to tell everything to your mortgage loan originator. Your mortgage loan originator will find out what his mortgage company’s mortgage lending guidelines are concerning borrowers who are going through a home purchase during divorce process. The mortgage 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, and asset settlement agreements.
Child Support And Alimony
If you are or will be receiving child suppor or alimony income and have been receiving it for at least six months and will continue for the next three years, you can use child support and alimony income to qualify for your new mortgage loan. A child support and/or alimony agreement and terms of the agreement needs to be provided.
If you are obligated to pay alimony and/or child support payments, the payments will be used as part of your monthly expenses and will be used against you in calculating your debt to income ratios.
Proof Of Mortgage Payments For Past 12 Months
In the event you are on a mortgage with an ex spouse and can provide that your home was awarded to your ex spouse and your ex spouse has been paying on the mortgage for the past 12 months ( proof provided by the ex spouse providing 12 months cancelled 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 your final divorce because if you ex spouse is making mortgage payments on your ex home with a joint bank account with your name still on it, you will be liable for half of the mortgage liability since your name is still on it. The new mortgage lender will consider this co mingled funds to pay a debt and will count it against you. It is highly recommended that you take off your name out of a mortgage on a home that was awarded to your ex spouse and have your ex spouse refinance it out of your name and into their name solely. This way, if they are ever late on paying their mortgage payment, it will not reflect it on your credit report.
Home Purchase During Divorce Process: Both Parties May Need To Come To Closing Table
If you are intending on a home purchase during divorce process and prior to your divorce being finalized, your mortgage lender may require a marital settlement agreement signed by both parties and approved by the courts. It is a good idea to separate your assets as soon as possible and provide detailed letters of explanations. Both parties need to be civil with one another and both parties will need to be at the closing table. If you are still legally married, the ex spouse may need to sign off on the rights to the home at closing.