In this blog, we will cover and discuss qualifying for a mortgage during and after divorce on purchase and refinance transactions. Divorce rates among Americans have surpassed the 56% mark. All marriages have a 56% probability of eventually ending up in divorce. Divorce can be very emotional and painful in more than several ways. You are not required to have the ex-spouse off the mortgage after a divorce. An ex-spouse can remain on the mortgage but the person not on the mortgage will have the liability if the mortgage does not get paid timely.
It does not matter who initiated the divorce. Both parties end up on the losing end. What happens when a husband and wife own a home and divorce? One person will end up with the home in most cases. The person getting awarded the house will want the ex-spouse out of the mortgage. How is that done? The short answer is to refinance the ex-spouse out the home with a refinance mortgage.
Divorce Decree Required To Qualify For Mortgage During And After Divorce
Married folks with children will have not just the children go through emotional grief, but other members of the immediate family. Grandparents, uncles, aunts, cousins, and others. Most people want the ex-spouse off the mortgage and deed of the home. There are two ways of getting the ex-spouse of the mortgage loan. Getting a release from the current lender is often very difficult to do and refinancing into a completely new mortgage loan.
Homeowners need to consider whether the home needs to be sold, buy one another out, or refinance their names to the spouse wanting to keep the home. One of the common questions often asked is qualifying for Mortgage During And After Divorce.
How Lenders View Approving Mortgage During and After Divorce
Anything can happen while a couple is going through a divorce. They can be civil one minute and the best of friends and the next day they can fight like dogs and cats. One person can agree to give the house to the other couple and then change their minds in an instant. Is qualifying for a Mortgage During And After Divorce possible?
Qualifying for a mortgage after the divorce has been finalized is no issue. However, many folks will have trouble qualifying for a mortgage during divorce proceedings. Most mortgage companies will recommend that borrowers wait until their divorces are final on a home purchase and refinance transactions.
Reason Why Lenders Recommend To Qualify For Mortgage Until After Final Divorce
It is very understandable why lenders will want borrowers to wait until their divorces are final. In community property states, assets are 50/50 on marital property. FHA and VA require spouses’ debts to be included when qualifying for FHA and/or VA loans. Married couples going through a divorce would have to count the spouse exiting the marriage when qualifying for home loans.
Many home buyers going through a divorce would not want to do that. Lenders will count both spouses’ debts on community property states qualifying for FHA and/or VA loans. Conventional loans do not require non-borrowing spouses’ debt to be counted on debt-to-income ratio calculations.
Asset Distribution During Divorce
The main reason why each spouse gets expensive divorce attorneys is to get the most assets and benefits out of their divorce. Typical arguments during divorce are the following:
-
- Custody of children and visitation
- Who keeps the house
- Or get the house of the departing spouse’s name
- Bank accounts
- Asset and investment accounts
- Vehicles
Main Reasons Underwriters Deny Mortgage During and After Divorce on Purchase And Refinance
One of the most important reasons why lenders do not approve loans during divorce is because they will not know what the final divorce settlement will be. Child support and alimony maintenance will affect borrowers’ debt-to-income ratios.
Both parties to the divorce may agree on a certain amount but the final figure will be up to the judge and courts to determine in the final divorce settlement.
What Type of Income Can I Use to Qualify For Mortgage During And After Divorce
Child support and alimony income can be used as other qualified income as long as it has been seasoned for six months after the final divorce. Child support and/or alimony income can only be used if there are three years of continuation.
The terms of this will be stated on the final divorce decree which means the divorce needs to be final.
Refinancing After Divorce To Take Ex-Spouse Out of Mortgage
If one spouse intends in keeping the house, the other spouse may want their name off the mortgage note. The only way this can be done is by refinancing the jointly owned home to the spouse that wants to keep the home. Lenders will want to see this agreement which will be stated on the final divorce decree.
Can I Get Mortgage While In Divorce Proceedings?
The simple answer to the frequently asked question of whether can I get a mortgage while in divorce proceedings is YES under one little but HUGE circumstance. Both parties need to cooperate fully from the start of the mortgage process until the close. Unfortunately, statistics prove this often cannot happen during most divorce proceedings. But if both parties are cordial and will work with each other, then you can get the mortgage while the divorce is in motion without it being finalized.
Borrowers who are interested in qualifying for a mortgage during and after divorce, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We can go over your options in qualifying for a mortgage during and after divorce. We are available 7 days a week, on evenings, weekends, and holidays.
Qualify For A Mortgage During and After Divorce With Gustan Cho Associates
Mortgage During and After Divorce on a House Purchase
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 when 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.
How Can You Get Title and Pay Ex-Spouse
Getting Awarded By House and Need to Refinance and Refinancing ex-spouse from the loan. 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 the divorce process.
Buying a home during the divorce process is not recommended. But there are situations where it is necessary.
Can You Qualify and Get Pre-Approved For Mortgage During And After Divorce on Purchase And Refinance
Buying a home during the divorce process can be done. Be prepared to write many letters of explanation and provide more documents than normal. Remember, that home purchase during the 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 the divorce process.
No Need To Worry: Gustan Cho Associates Can Help You Qualify For a Mortgage During and After Divorce
First Stage of Mortgage During and After Divorce
Homebuyers who made up minds and want to purchase a home during the divorce process need to make sure to disclose this fact to the mortgage loan originator. The mortgage loan originator will find out his company’s guidelines for borrowers who are going through mortgages during the divorce process. The lender will probably ask the borrower to provide the divorce decree or settlement agreement for items not reported 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
Mortgage During and After Divorce With 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.
Gustan Cho Associates Can Help You Qualify For A Mortgage During and After Divorce
Qualifying For Mortgage During and After Divorce to Take Ex-Spouse Off Title
In the event borrower is on a mortgage with an ex-spouse, needs proof that the borrower is not responsible. Need to provide a home was awarded to the 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.
Mortgage During And After Divorce: What Happens If Ex-Spouse Is Making Payments on the House
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.
Refinancing Mortgage During and After Divorce To Take Ex-Spouse Off Title
It is highly recommended to take off the name off of a mortgage on a home that was awarded to an ex-spouse. Have the 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.
Take Ex-Spouse Off Mortgage During and After Divorce
When Can I Get Mortgage During and After Divorce
For homebuyers intending on a home purchase during the divorce process without the 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. For those still legally married, the ex-spouse may need to sign off on the rights to the home at closing.
November 4, 2022 - 8 min read