QUALIFYING FOR A MORTGAGE POST-DIVORCE – Wanting a mortgage and getting a mortgage
Wanting to buy a new home or refinance your current home and qualifying for a refinance are two different things. Big factors for many divorcing couples is the reduction in income or changes in sources of income that you will use to obtain a mortgage. Lenders use a debt ratio percentage to determine if you qualify for a mortgage. This calculation looks at your future monthly debt payments (including the new mortgage) versus your monthly gross income. A mortgage loan officer can you “preview” these numbers to see if you qualify.
Here are some things to consider when it comes to your income and getting approved for a mortgage:
- Amount of income – with the more recent changes in mortgage guidelines, income and debt ratio are probably the biggest factor in getting a lender to say yes. So, if you moving from two incomes to one, you will want a mortgage expect to review your ability to qualify with your new household income as single. Also, if your future income includes child or spousal support you will need to understand the guidelines on how this income can be used for qualifying for a loan.
- Receiving Child Support, Spousal Support, and Alimony – will you be receiving any of these moving forward? If the answer is yes, there is a chance this can be used for qualifying for a mortgage. However, there are very strict rules on when and how these sources can be counted as income. A general rule is you need to receive any of this income for at least three years after the mortgage closes.
- Paying Child Support, Spousal Support, and Alimony – will you be paying any of these moving forward? If the answer is yet, this will count as a monthly debt on your mortgage application. So, you may want a mortgage loan officer look at numbers for you before finalizing your divorce numbers.
- Equity Buy-Out – As we mentioned earlier, the property settlement in many divorces involve the spouse remaining in the home to “buy-out” a portion of the equity from the departing spouse. And, this usually need to happen within a specified amount of time.