By Bill Cook, Mortgage Loan Officer — Brighton
Divorce is already stressful, but misunderstandings about mortgages and credit can make things worse. Many people assume a divorce decree automatically changes their financial obligations, but lenders see things differently. Here are some common myths and the realities behind them.
Recommendation: If one spouse is keeping the home, refinancing into their name alone is the cleanest solution. This protects the other spouse from future credit damage and makes qualifying for a new mortgage easier.
Recommendation: Plan ahead. Bring a mortgage professional into the divorce process early to confirm whether support income will meet lending guidelines and to explore refinancing or new home purchase options.
Recommendation: Review your credit report during the divorce process to identify all joint obligations. Whenever possible, have joint debts refinanced, paid off, or otherwise removed from your name.
Divorce is already stressful, but misunderstandings about mortgages and credit can make things worse. Many people assume a divorce decree automatically changes their financial obligations, but lenders see things differently. Here are some common myths and the realities behind them.
Myth 1: A Quit Claim Deed Removes You from the Mortgage
The reality: If your name is on the original mortgage note, you are still legally responsible even if you quit claim your interest in the property and your ex agrees in the divorce decree to take over payments. Missed or late payments can still show up on your credit report and impact your ability to qualify for future loans.Recommendation: If one spouse is keeping the home, refinancing into their name alone is the cleanest solution. This protects the other spouse from future credit damage and makes qualifying for a new mortgage easier.
Myth 2: Support Income Can Be Used Immediately to Qualify for a Mortgage
The Reality: Most lenders require proof that spousal or child support has been consistently received for at least six months and that it will continue for at least 36 more months after closing. The agreement must be in writing, as verbal agreements do not count.Recommendation: Plan ahead. Bring a mortgage professional into the divorce process early to confirm whether support income will meet lending guidelines and to explore refinancing or new home purchase options.
Myth 3: Divorce Removes Liability for Joint Debt
The Reality: Your divorce decree does not override your agreement with creditors. If your name is on a joint loan or credit card, you are still responsible in the eyes of the lender. Any late payments or high balances, even if your ex is supposed to pay, can harm your credit and impact your mortgage eligibility.Recommendation: Review your credit report during the divorce process to identify all joint obligations. Whenever possible, have joint debts refinanced, paid off, or otherwise removed from your name.