Here are some basic questions to ask while assessing your situation regarding home-ownership financing as a divorced person today.
Are you ready to buy?
Mortgage approval takes into account many factors: steady income history, relatively low debt-to-income ratio and good credit. It may be necessary to take time to improve your income or pay down debt to qualify for better interest rates and terms on a mortgage loan. Lenders will want to see that an applicant has been steadily employed for the last two years showing predictable income. You may need to rent for a while in order to develop a work history, reduce outstanding debt or address any other issues that may make it less likely for a lender to approve an applicant for a mortgage loan.
Did your credit take a hit?
Credit scores are key when it comes to getting approved. Get a free credit report before applying for a mortgage loan. Late fees, bills that recently went unpaid and new delinquencies can impact an individual’s credit score. Take steps to close any joint credit accounts and pay off joint auto loans. By doing this, an applicant can improve their credit scores and not allow an ex-spouse’s financial activity to continue to negatively impact their credit score when you apply.
Do you have a cash reserve?
Financing a home often requires a significant down payment and additional money to cover closing costs, moving costs, lawyer’s fees and more. Determine how much you can afford and how much you need to save in order to meet this additional expense, in addition to paying current expenses. If you’ve recently sold a home may want to use part or all of the proceeds to meet the new down payment.
Can the former spouse’s name stay on the old mortgage?
Those who have divorced amicably may choose to reduce potential disruptions in a household and may allow one household member and any children to reside in a home with both names continuing to be on the original mortgage loan. This is a completely reasonable option for some and for many a necessary option for a partner that may need to look for additional work to improve their income stream. It may be necessary to work out how mortgage payments will be made and how proceeds will be split once a home is sold.
Are there any pending issues?
It may be necessary to wait some time if child support arrangements, new jobs or other concerns may impact an individual’s future permanent location. Renting may be a better choice than owning while the dust settles. This allows newly-divorced individuals the time they may need to make sound and informed choices when it comes to the possibility of owning a home, and where that home should be located.
Carefully Consider Mortgage Products
There are many mortgage loan products available and while some may allow a potential home buyer to make a relatively small down payment, the terms and requirements may not suit every person’s situation equally. Those who divorce and have little debt, a high credit score and enough money for a 20 percent down payment may want to apply for a conventional loan. Otherwise, VA loans, FHA loans and USDA loans are other options. Understand which loans may offer a practical means to achieving home-ownership after a divorce.
Please call me at 702-835-6960 if you have any questions about divorce and your finances