Moving on from divorce means making a fresh start, and that process might involve buying a new home. It’s important to review your financial situation and check your credit score, earnings and debts after completing the legal proceedings. Here are steps to take to obtain a home loan after divorce.
Take a financial inventory
Your credit score is critical when searching for the best mortgage rate. Also, your credit report does not reflect your marital status. However, joint accounts will still appear on the credit report, and missed payments or unpaid debts can impact both credit scores. Since you’re starting a new life chapter, it’s wise to convert those joint accounts into individual accounts or pay off and close them altogether.
You should also monitor your credit reports closely for any errors. Monitoring is essential during any big event in your life, but especially during your financial transition as you work to obtain a mortgage after divorce. You can check credit reports from the three main credit reporting bureaus for free by visiting AnnualCreditReport.com. Dispute any errors you find, which will increase your score, helping to accelerate the mortgage application process.
It’s also important to pause and reflect on your new financial situation. How has your income changed? Do you have new or fewer debts going forward? Understanding your budget thoroughly will help prepare you for the next step.
Check the calendar
Now that you understand your financial situation, it’s time to start the home loan process. If your divorce isn’t finalized yet, you’ll want to get a clear picture of the timeline. For example, having your name on the house you purchased jointly with your ex will affect the amount you can borrow for a new home. All outstanding debts can raise your debt-to-income ratio, including the joint mortgage. To free up your credit for a new home, you can sell or your ex can refinance the house in their name.
Next, it’s time to get preapproved for a home loan. The current housing market is moving quickly, and you’ll want to be as agile as possible. By getting preapproved for a mortgage after divorce, you’ll be ready to strike as soon as the perfect home hits the market.
You’ve checked your credit report, grasped the timeline of your legal proceedings and obtained pre-approval for a home loan. Your next step is to start hunting for a new home with a few key considerations in mind. First, take into account your daily logistics. Do you have kids and plan to co-parent? If so, you’ll likely want to stay close to your current location. However, other aspects of your new home can be entirely yours. If you’ve been longing for a bigger backyard or a condo instead of a large family home, you now have an opportunity to fulfill those dreams without someone else’s input.
Last, you’ll want to choose your realtor and mortgage lenders carefully. For example, a realtor who understands your situation and the local housing market dynamics can help you move quickly and efficiently. They should know what you’re looking for, your goals and your timeline.
Your mortgage lender should be professional and flexible and tailor loans to meet borrowers’ needs. Obtaining a mortgage after divorce can feel daunting, but working with the right lender can make all the difference. Mortgage loan officers at First Centennial Mortgage understand that everyone’s financial situation requires special attention and care. By working with First Centennial Mortgage, you’ll have a trusted financial partner every step of the way. Contact us today to learn how we can help you make a fresh start.