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Points to Consider: Applying For Home Mortgage While Getting Divorce

Points to Consider: Applying For Home Mortgage While Getting Divorce

Bob The Broker
Bob Friel
Published on February 16, 2024

Points to Consider: Applying For Home Mortgage While Getting Divorce

When you are on the cusp of a divorce and one partner leaves the home, things can get very difficult for the other. There will be complex issues such as transferring mortgages, finding sufficient assets to even out the value in the divorce, and even being able to support the monthly costs related to your home.

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The simplest way to get around these issues is to sell the joint property, divide the proceeds between the two of you, and start life afresh. But do not go into a long-drawn-out selling process together. Get your priorities right, work out the financial aspects together, and how much you should sell the property for so that the divided proceeds will put both of you in a comfortable monetary position to move ahead.

There are many questions to answer when you consider selling your house while getting divorced. How about qualifying for a mortgage after divorce or applying for a mortgage when separated for a new home? All these are doubts that can set you back in the long run if you do not get it right the first time around.

You will do your best in these circumstances to talk to legal experts in this field. We at FGM will guide you about selling your marital home and buying a new one. We will offer you effective divorce mortgage advice so that you do not face any problems later. While assigning a value to a property can be easy, dividing it can be tricky. Count on us to help you navigate this minefield!

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Now let us take you through some of the property-related issues that haunt couples during separation or after divorce and what to do in these cases.

Qualifying For A Mortgage After Divorce

Your eligibility to apply for a mortgage after selling your home will be directly impacted by the time you finalize your divorce. Lenders prefer that a final settlement is in place before considering a new mortgage application or a temporary settlement at the bare minimum.

To ensure qualifying for a mortgage after divorce, it is always advisable to go for a preapproval as early as possible in the divorce settlement process. This will help you to understand what is the best time to apply for a mortgage. You will also know what are the formalities to fulfill so that your loan application becomes officially approved.

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The reason why a final settlement is advisable is to avoid the possibility of your planned financial commitments blowing up in your face. This will alter the terms of the mortgage that you want.

An example will illustrate this point better. Suppose one spouse is staying on the property and wants to take over the existing mortgage. The entire liability will be transferred and it must be proved that he/she can handle the mortgage single-handedly. This option will be known to you only after the divorce settlement.

This is not the only case. To know more about qualifying for a mortgage after divorce, talk to us at FGM. We will guide you on the finer nuances such as refinancing a property pre-divorce or pre-settlement that will best meet your specific situation.

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Using Alimony to Qualify For Mortgage

When you apply for a mortgage, the first thing that lenders verify is your income stream. Alimony checks are considered valid income sources. It boosts your income and often convinces the lenders to sanction a higher loan.

Alimony payments are not the same as child support payments and are often referred to in court documents as spousal support or spousal maintenance payments. It is a payment offered by one spouse to another for support after divorce. Hence, nothing is stopping you from using alimony to qualify for a mortgage to buy a new home after selling your old one.
Taking Divorce

Applying For A Mortgage When Separated

It is common for people to want to move forward quickly with their personal lives during or after a divorce. Hence, take the following steps when applying for a mortgage when separated.

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  • Settle the legal proceedings: The first document that your lender will ask for is the legal separation agreement. Even though buying a house while separated but legally married is possible, you have to provide additional documentation. An order, finalized and signed by a judge informs the lender who is responsible for what after divorce.
  • Remove yourself from the mortgage deed: If your ex has been legally awarded the marital home, remove yourself from the mortgage deed. It absolves your responsibility legally from ownership of the property. Do so officially with a quitclaim deed or better so, contact us at FGM for professional legal help on how to do so. If you have been awarded the home, you can either keep it or sell it and apply for a fresh mortgage for a new home.
  • Divide your finances: When a couple divorces, the court issues a decree that divides the debts, marital assets, and money and stipulates what each owns. When the finances are separated, your credit score precisely represents your financial situation. If you do not divide your finances officially, any poor financial decision of your ex-spouse can hurt your credit score thereby impacting your ability to apply for a mortgage when separated.
  • Know how much you can afford: Figure out your income and outgoing expenses as it can impact both the down payment and the amount of mortgage repayments you can afford. Consider attorney fees, alimony, child support, and other costs. All these will influence the debt-to-income ratio calculated by lenders.
  • Get a pre-approval: Once your divorce is finalized get a mortgage pre-approval as it shows sellers that you qualify for a home loan. During pre-approval, your lender also verifies your finances and informs you how much you can afford to pay for your home.

These are some of the points to consider for selling your house while getting divorced and buying a new one. We at FGM will guide and advise you in this regard as our legal experts have years of experience in this field.

Give us a call today!

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