Your divorce still is not over but you do not want to rent. Can you purchase a house instead? Can you get a mortgage during your divorce? The law does not necessarily prevent a party from buying a home while the divorce is pending. The bigger questions are the source of the funds for the down payment and whether you can qualify for a mortgage in light of the uncertainty.
To some degree, the answers depend on the situation.
In the easier situation, the parties sell the marital residence and one or both parties would rather buy than rent. Typically, the parties would agree to divide the sale proceeds and use them for the down payments on their respective new homes. Qualifying for a mortgage is theoretically easier given that the mortgage on the former marital residence would be paid off at the time of the sale. Still, there may issues in obtaining a mortgage, especially for the dependent spouse, when the divorce is not yet finalized.
In the more complicated situation, one party remains in the marital residence and the other wants to buy a new home. The spouse wanting to purchase a new home must have the funds for a down payment in addition to qualifying for a mortgage. Do not use marital funds to purchase a new home without first obtaining legal advice. If they are obligated on the mortgage, they may have too much debt in their name to qualify.
In the past, the attorneys have written letters to the lender explaining what we believe to be the support obligation going forward. Sometimes this works. Other times the lenders want more certainty.
My specialization is in divorce and not in obtaining a mortgage. Therefore, I turned to my colleague, Lori Altrudo, a Senior Loan Officer at Patriot Lending Services, Inc. for guidance. Lori states,
“When one is considering divorce and wants to keep their current home or even purchase a new one, it’s important to consider these factors before applying for their mortgage. Child support and alimony need to continue for at least three years from closing date for us, the lender, to use it as qualifying income. It must be in the settlement agreement and court ordered. Another very important factor is freezing retirement funds. When this is done prior to or during the mortgage application process, there’s a 98% chance the loan will not get approved. If one of the parties to divorce needs to pull income from a retirement account to show income, they will not be able to do so.”