How to Obtain a New Mortgage After a Divorce

Qualifying for a mortgage after a divorce might require a little more preparation.

Although qualifying for a mortgage post-divorce is not impossible, the timing may present a few problems. You might have only half the borrowing power you enjoyed when you were married because your spouse’s income is no longer part of your financial equation. You may be paying or receiving child support or spousal support, which will either decrease or increase your own income. Mortgage lenders weigh both issues when deciding whether to approve you for a mortgage.

Instructions

1. Remove your name from the mortgage against the home you shared when you were married. If your spouse is keeping the home, he will have to refinance the existing mortgage into his sole name to relieve you of any responsibility for paying it. Unless you earn a significant income, most lenders will not approve you for a new mortgage if you’re still legally responsible for the existing one. If you sell the marital home, this pays off the mortgage, so it’s no longer an issue. If you didn't own a home together, that also avoids this problem.

2. Get a copy of your credit report so you can remedy any problems with it before you try to obtain a mortgage. Most divorce decrees divide joint marital debt between spouses, but this generally only assigns responsibility for paying them. It doesn’t change the loan contract itself. As far as your creditors are concerned, you and your spouse remain joint obligors if you both signed for the account. If your spouse isn't paying a joint account that your decree assigned to him, it will affect your credit rating as well.

3. Examine your budget to determine what you can reasonably afford to spend on mortgage payments. Most lenders won't approve you for mortgage payments that exceed 28 percent of your gross monthly income, according to Divorce Magazine. For example, if you earn $6,000 a month, lenders probably won’t approve you for payments of more than $1,700 per month. If you’re receiving child support or alimony, you can usually count these as part of your income, but if they make up 30 percent or more, you might have to prove to the mortgage company that your spouse has made the payments consistently over a period of time. If you’re paying support, the lender will consider this as an obligation that affects your debt-to-income ratio.

4. Determine the source of your down payment. If your spouse refinanced the marital home, he probably did it for an amount more than the original mortgage so he could buy out your interest in the home. If you sold the marital home, you and your spouse probably divided the proceeds. Either way, you probably have a set amount of cash available. You might have to put down as much as 20 percent of your new home’s purchase price to qualify for a mortgage.

5. Shop for a mortgage lender with a reputation for working creatively with potential homeowners. For example, if your divorce decree obligates your spouse to make a sizable equitable distribution payment to you for your half of marital property, but you're not going to receive that payment for two years, you might want to match your mortgage to the circumstance by taking a mortgage with a balloon payment due at the end of that time. Find a lender willing to consider your personal circumstances post-divorce and work with you.

References

• Bankrate.com; Getting a Divorce? Protect Yourself Financially; Amy B. Crane
• USBank: After a Divorce – Achieving Your Financial Goals
• Divorce360; Buying a Home After Divorce; Jason Rich
• Divorce Magazine; Surviving Financially After Divorce; Fadi Baradihi
• FHA.com: Alimony, Child Support and Separate Maintenance – Does it Count as Income?