Going through a divorce can be one of the most painful experiences of one’s life. The difficulty of going your separate ways can be compounded if you owned a home with your former spouse.
You have a lot to consider when deciding what to do with the former family home, but the good news is that you’re not alone. Many people have been in your shoes, and experienced professionals can help.
The key is to seek assistance early, according to Nicole Schoonover (NMLS# 246722), Senior Loan Officer with Supreme Lending. “Work with the lender and [divorce] attorney before the divorce is final,” she said.
The following are some commonly asked questions regarding mortgages and homeownership after a divorce.
Should I stay or sell? This decision is a personal one and will depend on your specific circumstances, but there are options.
If the mortgage is in your name, you do have the option to stay in the home assuming that you can afford to do so on your income alone.
What if you can’t afford the mortgage by yourself? You can also allow your ex to stay in the home. If you decide to do this, you will want to work out the details on how to split the profits of a future sale, according to a USNews.com interview with Katie Connell, a family law attorney with Boyd Collar Noel & Tuggle in Atlanta.
What happens to the equity in my home?
If you decide to sell, you may be required to split the equity in the home with your ex-spouse. The equity is calculated by getting the house appraised to determine the current value and subtracting any cost of selling (such as commissions and closing costs).
If your ex-spouse put a marital lien on the property or there is a court-ordered mandate for distribution of the equity, there will be a specified amount of time during which the equity funds must be obtained.
Will this impact my credit?
In most cases, a divorce will impact your credit in some way. This is why it’s so important to work with a mortgage loan officer before the terms of the divorce are finalized. Some customers don’t speak with a mortgage professional until they have already been ordered to pay out equity and they can no longer qualify for a mortgage.
“Working with a lender along side your divorce attorney can help with how the assets will be divided and how the customer can afford to keep the home and get a loan in their own name,” explained Schoonover.
Can I buy a new home?
I you choose to buy another home, your credit and income will have to qualify for the mortgage loan on their own. Keep in mind that child support and alimony may be counted as income if documented in the divorce decree, received for three months and have the likelihood of continuance for at least three years. Similarly, if you’re paying child support or alimony, it will count as a debt when calculating your debt-to-income ratio.