The thought of getting a divorce is painful but it is a reality that happens to a lot of families. While the emotional repercussions can eventually be healed through therapy, the financial consequences usually take on a more complicated process for it to be resolved. One of the things affected by a divorce is the mortgage as most of the time, both parties no longer want to live in the same house. Thus, this raises the need to buy another house for one of the spouses. Here are some tips to make sure that you are still able to get a mortgage after a divorce:
Sell the House and Buy two Houses
Selling the house may seem counterproductive but it is the easiest way to let go yourself and your former partner of the mortgage payments, taxes, maintenance costs as well as insurance rates. This will mean lesser risks of missing out on monthly payments, which would then negatively impact your credit score. Your share of the sales from the house can also be used as down payment for the house that you intend to buy.
Do Not Apply for Refinancing or Mortgage During Divorce Proceedings
A half decent divorce lawyer would advise you against buying a house until you’ve completed the collaborative law process. This is because lenders would not take kindly to alimony or child support, even with good credit history and income stream. Lenders, after all, consider these payments as debt.
Establish a Good Credit History
A divorce actually opens an opportunity for you financially as it would mean that you will have more chances to have a loan approved because your own credit score will not be dragged down by your partner’s. To further improve your chances by establishing great credit, you can get a credit card and make sure that you pay it every month. Treat it like a debit card, only using it for necessities. This will keep you from getting charged interest and could lead to easier mortgage approval.
Have One Spouse Assume or Refinance the Mortgage On His/Her Own
The key to getting your mortgage approved by lenders is to lessen your debt. One way to do this is to have one spouse either assume or refinance the mortgage on his/her own. This has been proven to improve people’s chances of getting a new mortgage. Either you or your former partner needs to sign a quitclaim deed so he/she no longer has rights to the property.
If your partner is unable to take on the mortgage as a sole debtor, you can continue paying the mortgage as a co-owner for a few years. It would make sense for the divorcees to sell the house in the future and have the two parties split on the sales to cover up the installments and home maintenance costs.
Re-qualify for the Loan
If you are determined to have your former partner’s name taken off from the mortgage, a great way for you to let lenders know that you can carry mortgage payments on your own after a divorce is to re-qualify for the current mortgage.