Divorce is never easy – especially when trying to navigate through financial transitions. The best way to ease the stress of the home buying process is to prepare in advance. Although getting approved for a mortgage during a divorce isn’t without its challenges, there are few steps you can take to smooth the process.
Sort Out Your Finances
One of the most proactive ways you can prepare for applying for a mortgage is to sort out your finances in advance. To ensure you can get the best mortgage rate possible, you’ll want to make positive strides towards financial independence.
Separate Accounts
If you’re recently separated or divorced, you’ll want to separate any open accounts as quickly as possible. This will allow mortgage advisors to take an accurate snapshot of your current financial situation. It will also decrease the chances of hitting a snag during the application process.
Watch Your Credit Score
Once you have your accounts sorted out, make sure to maintain good standing in regards to credit history. Paying off balances in full, making payments on time, and avoiding canceling or opening new accounts will help reinforce your credit score over time.
Prepare Your Paperwork
There are several types of documents needed for the mortgage application process. This paperwork is particular important when dealing with a divorce because it provides the lender with the most up to date information regarding your eligibility.
Tax Returns
Having your most recent tax return documentation will help your lender get a clear picture of your recent income as an individual. This is the number that they will use to determine your affordability when searching for homes. If there’s a significant difference in the amount of money you’ve earned in one of the past couple of years, be sure to explain why this happened (whether it be due to illness/injury, maternity leave, some other life change, etc.)
Child Support Documentation
If there was a child support arrangement, having the official documentation from the court will help determine your accurate debt to income ratio. Whether you are paying or receiving child support, it’s important to gather all these documents before the loan application process.
Divorce Decree
After your divorce is finalized, a copy of your divorce decree will be helpful as additional confirmation of separate finances. Since your credit only shows individual history, this is further proof that there are no additional financial obligations such as support.
Taking these steps will ease the transition of applying for a loan as an individual. If you have any questions regarding obtaining a mortgage or eligibility requirements, feel free to contact us.