You won…the house is yours and now you do not qualify for the mortgage to buy out your partner……….Is this the situation you find yourself in?
I recently worked with a woman who had separated from her husband in 2008. She is living in the family home with her children and her husband is making the mortgage payments. Something happened in their dispute and along the way he started missing mortgage payments. The mortgage is in both names and the end result is that her credit score dropped significantly.
December 2011 she received the court ordered divorce settlement, which granted her the family home. This means she now has to secure a mortgage in her own name to take over the mortgage loan and pay him his share of the settlement agreement. She went to the current mortgage holder (the bank) to arrange for a new mortgage. The bank said no thank you, we won’t refinance your mortgage for you.
On paper she should qualify for the mortgage on her own. She has a fulltime job and she is receiving child support payments regularly. She has sufficient income to qualify for the loan and to be able to afford to make the mortgage payments on time. The problem here is that her credit score is significantly below the threshold that lenders rely on to determine her credit worthiness to qualify for the loan.
Protect your credit score
Your credit score is what gives you the ability to finance future purchases. If your score becomes damaged during divorce, moving on can become extremely difficult. Part of my mortgage service is to counsel you on ways to preserve and improve your credit score during divorce.
Remember, if mortgage payments are missed because your spouse has failed to make a payment, YOUR credit score will suffer too. Regardless of what your divorce decree says or what’s fair, if you have a joint debt, you’re responsible for it.
Here are some ways to protect your credit score BEFORE any payments are missed:
• If possible, close all joint credit cards immediately. If you can’t close one because there is still money owed on the account, freeze it so no one can continue to use it.
• Make sure you continue making at least the minimum payments in the meantime. Then come to an agreement with your spouse on transferring the joint debt to individual credit cards.
• If you do not have a credit card in your own name, get one now. Building your own credit history takes time, so start today!
• While waiting to sell your home or refinance it, make sure your mortgage payments are up to date, even if it comes out of your own money. This protects your credit score and you’ll likely be able to claim the funds back under court order.
• After you have moved out of the home, make sure have your name removed from the property title AND from the mortgage, so your credit score doesn’t continue to be impacted.
For this client, she was able to get approved for a mortgage with a lender who charged a fee and a higher interest rate for a one year open term. I am working with her to improve her credit score and in one year we can look at placing her mortgage back with a traditional lender (mortgage company or a bank).
I believe that if she had of consulted with me earlier in the process I could have given her some advice and developed a strategy that would have helped her to achieve her goal, owning the family home, without the last minute stress, frustration and added expense.
If you are going through the divorce process and owning the family home is one of your goals, let’s talk and develop your strategy. Call, text or email me today….. Karen@Mortgagecentrebc.com 604-726-9550