Divorce and Your Mortgage - Common Questions

If you’ve going through a divorce, a fresh start comes with new matters to consider for where you are going to live when everything is finalized.  Whether you are buying a new home or staying in your current home chances are likely that you will need to qualify for a new mortgage loan.   Because you are qualifying for a home loan on your own now, and with the possibility of including alimony or child support as part of your overall credit picture, you should involve a mortgage lender early in the process.   Getting numbers now will help you have a clearer understanding of your finances post-divorce.  

Some common questions:

  1. Should I stay or should I go?  As part of the property settlement agreement, your former partner may keep the current home (and buy out your equity portion), meaning you'll be moving on and looking for your own home.   Or you may stay in your current home, needing to refinance it (and possibly pay a portion of the equity to your ex).  With either of these two scenarios, you will be shopping for a new mortgage and should explore the loan qualifications early in the divorce process.
  2. How do we settle out the equity in our home?   If you decide to stay in the home chances are you will need to pay your ex-spouse his/her equity portion in the home as part of the overall property settlement agreement.   Commonly this is accomplished with a refinance of the property with cash from the refinance going to the former partner to settle the equity stake (and the home will then be titled in your name alone).   Getting mortgage and payment numbers for any new mortgage loan will help you better understand your financial position post-divorce.
  3. Alimony and Child Support - what if I am RECEIVING it?   Alimony and child support can be used as qualifying income for a mortgage.  However, there are duriation and receipt time frames to meet.   We understand the mortgage guidelines for these types of income and can help you determine if (and how much) can be included in your income.
  4. Alimony and Child Support - what if I am PAYING it? - both alimony and child support will be counted as monthly credit obligations towards your overall debt ratio.   Chances are you will be needing a mortgage to either buy-out/remove your current spouse or for financing a new home.   Getting mortgage numbers early in the process can ensure you will qualify for a new mortgage if your debt ratio includes alimony or child support.   

Knowing the impact of a divorce on your mortgage loan during the early stages of the process and what the most viable options are can benefit both parties.  It's never too early to go through the "pre-qualification" process to see if and what you can qualify for post-divorce.  We have the experience, guideline knowledge, and tools to help you accomplish your goal of homeownership after the divorce "dust settles" and you enter the next chapter of your life.   Call us at 440-247-5656.   Or, email Steve and steve@cstonelending.com