Separation and divorce is often a time of significant change. Beyond the emotions involved there is the reality that life going forward will look quite different than previously expected. However, there is the opportunity for a fresh start!
For individuals going through a separation or divorce, a common question is “where will I live?” This is shortly followed by questions like:
- What can I afford?
- How much do I need for down payment?
- What will be my monthly payments?
It can easily become overwhelming!
Just as it is beneficial to consult with an attorney to help you navigate separation and divorce, working with a mortgage consultant experienced with these situations who is empathetic to the unique conditions of this transition period can pay off for years to come.
Even if you have previously owned a home, financing a home for the first time by yourself may be a new experience. Perhaps your spouse handled the details of paperwork or analyzed the pros and cons of a purchase. Maybe they ran the family budget and made sure how the monthly payment factored into those calculations. Regardless of your previous involvement with owning a home, using a trusted mortgage professional will help you understand and evaluate the financial aspects of buying or refinancing your future home.
During separation or after the divorce there are some extra considerations regarding how income and debts are calculated:
Income (Spousal support/alimony, child support, etc):
- May be used if there is a separation agreement/court order
- Usually need to receive for a minimum of 6 months
- Income will need to continue 3 years from closing/mortgage note date
- For child support for children who will turn 18 within 3 years of the closing, the lender will need to know how long it will continue past legal age
- Variable income (such as a percent of bonus) will need to provide as much detail as possible on minimum and maximum amounts (supporting documentation may be needed)
- Accounts assigned to the other party may be excluded from borrower’s liabilities (e.g. joint mortgage on marital home)
- If the other party is paying liabilities not addressed in agreement, you may need to provide a 12-month payment history to exclude this debt
When you’re separated/divorced, the desire to quickly establish a new home can be a powerful motivation for action. It’s important to pause long enough to make sure the steps you take benefit you not just in the short-term but also help accomplish long-term goals.
I’m passionate about helping clients navigate this transition period by using my knowledge and experience to help make the next chapter of home ownership a positive one. If you – or anyone you know – can use some answers to questions about obtaining a mortgage while separated or divorced, I’m here to help.
Rebecca Richardson is a Charlotte mortgage consultant who excels at helping clients choose the appropriate mortgage strategy and enjoys demystifying the financial process on her blog at rebeccarichardsonmortgage.com. She can be reached by email or at 704.488.8883.