If you’ve been through a divorce, you know there may be a million little things to work out in the divorce process. If you’re a homeowner with your former spouse on the mortgage, one of the items you must address, usually after the divorce, is how to handle your house.
If you’re going to stay in the home, you may need to refinance to remove your ex from the mortgage. Maybe you’re looking to use child or spousal support payments from the divorce to help you qualify to buy a new house. Your mortgage lender will need to make sure you financially qualify to make the mortgage payments. In addition, they’ll take a look at documentation to see if your spouse was paid a consideration, or monetary amount, for their equity stake in the property.
Let’s take a look at how your divorce documents are part of this picture.
Child Support or Alimony Payments
If you’ve had children together, child support might be part of the qualification process. The same holds true if one of you has been ordered to pay spousal support to the other as part of the divorce agreement.
If you’re the party receiving the financial support, the money could help you qualify for the mortgage. Child support and alimony are considered acceptable sources of stable income if they’re scheduled to continue for at least three years after the mortgage application or closing, depending on the type of loan you apply for. You also have to document a history of receiving the payment.
On the other hand, if you’re the spouse paying child support and/or alimony, this is a recurring monthly expense that is counted in your debt-to-income (DTI) ratio. However, there are circumstances in which the payments can be excluded from your DTI.
At Quicken Loans, if you have to make just 10 or fewer child support or alimony payments, this debt doesn’t have to be included on conventional and jumbo loans (nine for VA loans). It may be possible to exclude this debt with an FHA loan, but the requirements are a little more complicated: Be sure to talk this over with your lender.
Your lender will also need to see divorce documents to glean if any consideration was paid to your ex-spouse for their equity in the home. The lender needs to know the dollar amount before they can have a quitclaim deed processed to take them off the title.
The purpose of having the figure documented is to make sure the payoff is agreed to before your ex is removed.
To verify the property-related terms of the divorce, lenders may request any of the following documentation from you:
- Divorce decree
- Final separation agreement
- Divorce-related legal agreement
- A settlement signed by the judge
If you are receiving child support and/or alimony payments, a Friend of the Court letter may work instead. If child support payments can be excluded from your DTI, a copy of each qualifying child’s birth certificate can be used to verify their ages.
The divorce process can be time-consuming. If you still have questions, let us know in the comments. We’ll do our best to find the answers.
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