5 Ways To Ensure Mortgage Approval After A Divorce
Things can get ugly in a divorce and many aspects of family life are affected. One of the things a spouse may lose in the process is their home.
He/she may now have to find a home but buying a house is also not easy as lenders are getting tougher and pickier with their mortgage loan approvals. Here are some tips to make sure your home loan applications will have a bigger chance to be approved:
1. Put The Current House Up For Sale
A lot of memories and sentimental value may be associated with a house but with divorces, selling the property is almost always the safest choice. This will free the former couple of having to pay for the mortgage, house maintenance, insurance, and taxes. At the same time, the share of the sales can then be used as down payment for the mortgage lenders. According to Time Money, this is the “cleanest way” to pay off the mortgage.
2. Refinance Current Mortgage
A refinancing occurs when a new lender comes in to pay off the original lender so the payment schedule will be operating under what is usually a lower interest rate. This is a smart move for the spouse who will be taking over the house or when the other spouse decides to still take the property under his wing. By refinancing, potential borrowers will have lower debt, improving your chances of getting your mortgage approved.
3. Remove Name From Current Mortgage
Most of the time, the court decides who gets the house after a divorce. But if you are in good standing with your former partner, then you can decide together who gets the property.
Just a word of caution - do not file for quitclaim deed and removal of name from the mortgage loan before a decision has been reached. If these processes are approved and the court rules the other way, the court’s decision is going to be followed anyway as the house is marital property.
4. Pile Up On Cash
Even with a spotless credit history and a great credit score, a potential borrower may still have his mortgage loan application turned down if the required down payment is not settled. This is why it's crucial that you have enough cash when you walk into the lender’s office.
5. Improve Credit Score
Do not expect to have an approved mortgage application if you have a really poor credit score and credit history. More than anything else, your credit score will be the biggest hurdle to you getting a home loan so you need to have a decent record.
One of the few ways to improve credit score, according to Forbes, is to get a traditional credit card and be responsible for paying your bills monthly. If this would prove difficult, a secured credit card would be your next best option. Just make sure that the credit card you get will be reported to all three major credit bureaus. A prudent approach is to only use up to two-thirds of your credit limit as that would be interpreted by credit agencies as fiscal responsibility.