How To Get A Mortgage After Divorce: Everything You Need to Know

A mortgage is a substantial financial obligation. Whether you are buying a new home or refinancing your current home after a divorce, it's essential to know the best way to move forward in the mortgage process. In this post, we'll explore some of the most common questions people ask about mortgages after divorce and provide ways that you can help you move forward in the mortgage market after a divorce.

How To Buy A House After A Divorce

A lot of change happens when you're in the midst of a divorce. You might find yourself changing names, splitting assets, and figuring out new living circumstances. Within this madness, you might be wondering what you need in order to buy a new house or refinance your mortgage. Here are the most common factors you'll need to consider as you apply for a new mortgage.

Income

Once you're divorced, your income may look dramatically different than what it looked like with your spouse. If you're buying a home, you'll need to make sure your individual income is enough for the monthly mortgage payment. The lender will want to know your income, and how much of it goes towards paying off debts, child support, and regular living expenses.

Applying for a loan by yourself may cause the amount you're qualified for to dramatically decrease unless you have another family member or partner to co-sign for a more significant loan amount. Once you've determined how much income you'll have to put towards a home, you'll be able to understand if purchasing a new house makes sense for your situation.

Down Payments

Besides having enough money to afford monthly house payments, you'll likely also need a downpayment to purchase a new home. However, this may be difficult depending on the costs of your divorce lawyer and the splitting of assets.

The old downpayment rule recommended that home buyers should put down 20% of the cost. This would mean if your new house costs $100,000, you'll need to put at least $20,000 towards it upfront. However, this has dramatically changed, with most home buyers putting down 5% or less of the cost of the home. Plus, you can't forget the closing costs associated with a house, which can cost anywhere from a few hundred to a few thousand dollars.

Credit Score

You'll also want to make sure your credit score is high enough. Your credit score is determined by a number of factors, including your debt-to-income ratio, the number of accounts you have, and how much you owe on them. If you have a higher credit score than your ex-spouse, this may work in your favor for securing a better mortgage rate. On the other hand, if you don't have any credit, you'll need to spend some time working on re-building before choosing to pursue a mortgage.

The mortgage lender will want to see a score over 620 before they'll give you any type of loan. If your credit score is below 620, it may be difficult for you to get approved no matter what your income looks like or what size down payment you're able to make. However, there are exceptions depending on what type of loan programs or assistance various vendors may offer.

Applying For Your Loan

Once you've determined that you have what is needed to be approved for a mortgage, the next step will be submitting an application. Since there are hundreds of programs available, you'll want to consider what makes the most sense in terms of mortgage rates and the lender's reputation. Remember that house loans are often 15 to 30 years long, which is a substantial amount of time to work with one lender. You'll want to make sure you're choosing the right company to finance the next home of your dreams.

Wait Until The Divorce Is Finalized Before Getting A Mortgage

If you decide to buy a home while you're still in the middle of a divorce, your spouse may try to claim that they have ownership of the property. These assets are considered marital property if they're purchased within the marriage, especially if you use funds from a joint account or funds that were acquired during the marriage.

Instead, it's better to wait until the divorce is finalized to ensure that you won't run into any legal problems owning your own home and to make sure that your new financial situation works to make a large home purchase.

Getting A Mortgage After Divorce

Getting a mortgage after divorce can seem difficult if you don't have the correct credit score or enough income. You'll need to consider your financial situation in order to make sure purchasing another house is worth it for you without taking any unnecessary risks. Thankfully, there are plenty of different types of loans available that may work better depending on what you're looking to purchase and how big of a loan you need.

If you realize that you might not be in a place to purchase a home right after your divorce, that's not a problem. Most people find that they need to rent a home, build up their credit and save a little extra cash before purchasing a home on their own. Either way, understanding how to get a mortgage after a divorce can help you take the appropriate steps to build your new life after your divorce.