Continuing with a post-divorce "TO DO" list, many of our clients find themselves needing to obtain a mortgage either to refinance their existing home or to purchase a new home. Hopefully this is something you have considered in the division of your assets and already planned for as a part of your divorce process.
Here are some good facts for you to know:
Establishing and maintaining good credit is of paramount importance. To check your credit history log onto www.annualcreditreport.com and obtain a free copy of your credit report.
Try to have at least 3 separate lines of credit in your own name, each having a 2 year history. These may include store credit cards, Visa or MasterCard and installment payments such as a car loan. Debit cards and gas cards do not count as lines of credit.
Your credit score can be negatively impacted if you have too many inquiries or if your outstanding balance on each card is greater than 1/3 of the limit. For example, if your credit limit is $5,000 you should try to keep your balance below $1,650 on that card.
Alimony and child support can be used as income for the purposes of obtaining a mortgage however most lenders will not consider them as income until you can show that you have been receiving payments for at least 6 months. Lenders need to verify receipt by showing the source of the direct deposit or copies of the checks. You can take a picture of the check before depositing it and keep it as verification to match up with your bank statements when applying for a mortgage. Keep the deposits separate from other deposits so the amount of the check can be matched with the deposit.
Child support, in order to be counted, must be guaranteed to continue for at least 3 years. This is important!!! Although child support in Massachusetts can run until graduation from college (age 23) there is no mandate that your child attend college. Therefore, the lenders ability to count child support as income for a mortgage can end if your youngest child is over 15. Please check with your lender about this.
If you agree to hold your house jointly, or not to refinance post-divorce, how does the spouse who is not living in the home (let's say "the husband") obtain a mortgage? If it is written into your agreement that the spouse residing in the home (let's say "the wife") is solely liable for the mortgage payment, then the husband can remain on the mortgage and not have it counted against him as a liability when he applies for a mortgage in his own name on a new residence.
Thank you to Chari Goodman for providing this helpful information, NMLS # 424923, Senior Loan Officer at Mortgage Network.
Renee is also a Certified Divorce Financial Analyst (CDFA), a financial neutral and a trained mediator. She specializes in working with clients, their attorneys or mediators through all phases of the divorce process.