Mortgage applicants are often surprised to learn how much additional paperwork is required if they're getting divorced or they receive or pay alimony or child support.
And, they're surprised to learn that a divorce that may have happened a few years previous may still have bearing on the loan process.
In this post, you’ll learn what to expect – and what paperwork to provide – if you're currently separate or divorced and applying for a loan.
Alimony and Child Support
If you receive alimony or child support or both, you are required to submit every page of the separation agreement and/or the divorce decree with your loan application.
You must also be current on all child support and alimony payments. If you are behind, be sure to bring it to the attention of your lender. The fact that you are behind usually shows up on your credit report; however, it’s always good to be upfront.
Before closing on your loan, you will be required to bring your obligations up-to-date, depending on the exact loan program, scenario, etc.
In addition, as the borrower, you must disclose if you’re receiving payments or obligated to pay them.
Important: All payments have to be disclosed regardless of the number of payments left (i.e. you have only three payments left to pay or receive).
The underwriter determines if child support and alimony monies can be counted. Typically, underwriting likes to see at least three years continuance.
If you're the payer (meaning, you’re obligated to pay), underwriting will determine if child support and alimony needs to be counted against your debt ratio.
Joint consumer debt
Whether or not you’re in a Community Property or Spousal state (see below), joint accounts will be counted against your debt ratio UNLESS you can prove your ex-spouse has made the last 12 payments, on their own, from an account that has their name only (not a joint account). Copies of 12 cancelled checks will be required.
Joint accounts include:
- Installment loans
- Vehicle loans
- Credit cards
Your divorce decree may specify which debts you and your ex-spouse are obligated to pay. Regardless of what the divorce decree states, these payments may still be counted against the debt ratio if they appear on your credit report.
Commercial Property vs. Spousal States
In Community Property states, your spouse's debts will have to be accounted for IF you're separated but not divorced AND regardless of whether the spouse won't be listed on the new loan or title.
In Spousal states, an ex-spouse will have to sign some closing paperwork – even if he/she isn't on the new loan. The ex-spouse does not have to sign paperwork if he/she was not on the original title or the ex-spouse is being removed from the title during the new loan process.
See the listing below of Community Property and Spousal states.
Community Property States
- New Mexico
- New Hampshire
- New Jersey
- North Carolina
- North Dakota
- South Dakota
- West Virginia
If you have additional questions about how your separation or divorce affect your loan application – call Meridian Home Mortgage. Our friendly advisers are here to answer your questions. Call toll-free: 877-878-0100.
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