3 Tips for Getting a Mortgage After a Divorce

This was republished by Investopedia. You can view it here.

As you go through divorce, you may end up needing to purchase a new home, particularly if your soon-to-be-ex-spouse gets your house as part of the settlement. A new house may mean a new mortgage.

If this is you, there are a few things you’ll want to take care of first—to give yourself the best chance at getting a mortgage after your divorce. We’ll take a look at a few oft-forgotten facts to help you secure a new home.

1) Don’t forget to pay the current mortgage, even while you’re separated.

Even if you moved out of a jointly owned home during your separation, if your name is on the mortgage, you’re still responsible for the payments. You may want to ensure that your spouse is keeping track of the bills—to avoid damaging your own credit.

If your spouse refuses to make payments on the mortgage, your credit score can be significantly lowered. The result could be a much higher interest rate on your new mortgage, which will cost you thousands over the lifespan of the loan.

2) Remove your name from the existing mortgage.

Your settlement and divorce decree may declare that you’re no longer responsible for your marital mortgage, but that doesn’t mean you’ve been removed from the mortgage. Removing your name isn’t as simple as telling the bank you’d like to be taken off—even if a judge declares you free and clear. In order to officially separate yourself from it, your spouse may need to refinance the home or file an application to know the loan is solely under his or her name.

Until those two items are taken care of, the mortgage payments are still directly linked back to your own credit—no matter what your divorce decree states. Consider adding a provision in your settlement—that your spouse has a certain time period to accomplish one of those two options. If refinancing the home or assuming the loan is not an option, the home must be sold to rid you of all the requisite financial obligations.

3) Finalize your divorce before purchasing a new home.

As with all major life changes, your divorce will significantly affect your financial status. Even with adequate preparation (in terms of creating a budget and lifestyle analysis), your finances will still need to stabilize.

Consider holding off on applying for a new mortgage until you’ve had time to adjust to a newly single income, child support payments, and alimony payments. Once your finances are settled (and you have a better expectation for what your monthly expenses will allow you to spend), then begin searching for a new home.

Purchasing a new home immediately after your divorce is final can be tempting, but don’t forget to take care of these three items first. By making financially wise decisions with your current mortgage, you’re setting yourself up for success—when the time comes to get a new mortgage and move into your new home.

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