October 12, 2016

Mortgage After Divorce: Your Top Questions Answered

While divorce is rarely easy, buying a new home post-divorce isn’t as stressful as it may seem. You may have to take some time to reestablish yourself and tie up loose ends, but with patience and careful planning, you’ll soon be ready to make a fresh start in a new home. Here are answers to common questions from recent divorcees.

Is it the right time for me to purchase a home?

Taking on the responsibility of owning a home may seem overwhelming after all of the changes you recently endured. However, if you have steady income, good credit, and plan to stay in the area, it may make sense for you to buy and start building equity rather than pay rent. In the end, it’s a question only you can answer, but consulting with professionals for information specific to your situation is always a wise choice.

The divorce left my credit in a mess. What can I do to fix it?

Your credit score might take a hit while going through a divorce. A divorce in itself doesn’t hurt your credit, but with everything going on, bills may have been overlooked. Once bills are 30 days past due, creditors can report delinquencies to the credit bureaus, which lowers your personal FICO score.

If you and your ex have joint credit card accounts, pay off and close these accounts. And, if you have joint auto loans, consider selling these vehicles to pay off joint loans, or one person can refinance the car loan in their name and remove the other person’s name from the title. Also, order your credit report periodically to make sure it’s free of negative activity.

Can I use alimony and/or child support as income?

You can in fact use alimony or child support as income to secure a mortgage loan. As long as the payments will continue three years after the date of the mortgage application, you may use those payments as income to increase your loan preapproval amount. We will also need documentation of regular receipt of full payment for no less than six months.

How much can I afford to spend?

Of course, the answer to this question is different in each case. Typically, we look for a debt-to-income ratio of 43% or less, which is calculated by dividing your pretax income by your monthly debt obligations. Check out our mortgage calculator for an idea of a monthly payment amount with different mortgage scenarios. Also, before you start shopping for homes, contact us for a pre-approval.

At United Home Loans, we’re here to answer any questions and help you secure a new mortgage loan after a divorce. To learn more or get pre-approved, contact us below or at 708-531-8388.

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