Mortgage Tips for couples dealing with divorce – PART 2

The purpose of this article is to provide existing, and even potential homeowners who are, or soon will be dealing with divorce with some mortgage tips to help simplify the process of moving forward financially. Before going forward, I have to acknowledge that I am not a divorce lawyer, and therefore, the information provided in this article simply relates to qualifying for a mortgage post-divorce; whether for buying out a spouse to take ownership of the matrimonial home, or to facilitate purchasing a home on your own after the divorce. The mortgage tips contained in this article solely relate to mortgage qualification.

As we have discussed before, mortgage qualification is based on 3 primary factors:

Credit
Income
Down Payment/ Equity

These three factors remain paramount when it comes to applying for a mortgage during/after a divorce, and therefore, proper attention must be paid to all three. In this Part, we will provide you with mortgage tips related to credit management during a divorce/separation.

In Part 1 we discussed how to protect your credit for the purpose of future mortgage qualification, and now in Part 2 of this divorce related set of tips, we will be going over the income aspect of this scenario.

Mortgage Tip Number 1: Formalize any Child/Spousal Support Payments by way of a written agreement

In the process of mortgage approval, knowing your debts is just as important as knowing your income. In the event of a divorce/separation, often times there are support payments being made by one part to the other.

In the event that you are receiving support payments, those payments can be used as income -helping a homeowner qualify for a mortgage. However, in order for support payments to be counted as income, the payment amount(s), and length of time the payments will be received have to be outlined on a written divorce/separation agreement.

In the event that you are making support payments, those payments become monthly debt obligations that need to be accounted for in the process of mortgage qualification. Just as required for the payments to be accounted for as income, in order for the support payments to be included as a debt, the payment amount(s), and length of time the payments will be made have to be outlined on a written divorce/separation agreement.

Before either party in a divorce is able to qualify for a mortgage, they would need to have a formally written, and acknowledged divorce/separation agreement in place.

Mortgage Tip Number 2: Confirm your income situation with your accountant

Since income is one of the basic mortgage qualification elements, understanding one’s income is paramount. For those who are self employed, the separation of income during a divorce can be complicated since household income could have been represented in many different ways. Therefore, prior to applying for a mortgage, I always recommend that self employed homeowners meet with their account so that they understand what their income will be going forward, after a divorce/separation.

Once you have understood what your income situation will be like with your accountant, talk to a mortgage broker to understand how the new income will affect your mortgage qualification scenario.

In Conclusion

Qualifying for a mortgage after divorce is just as income dependent as it was while a person is married, or single. A homeowner needs to be aware of all their income, including; employment income, rent, child support, alimony, etc, and similarly needs to be aware of all their expenses: credit card balances, auto loans, mortgages, child support, alimony, etc.

In the process of qualifying for a mortgage after a divorce/separation, it is paramount for a homeowner to know the details of their income, and expenses.Take the time to know your situation, and ensure that you have the proper documentation to confirm the details of your separation/divorce.

In the next part of this divorce/separation related series, we will be going over the down payment/equity part of mortgage qualification. For more information contact us today.

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About the author

Anuj Gupta, BComm

Anuj was born and raised in Edmonton, and has been a broker at Alberta Mortgage since 2005. With a Bachelors of Commerce degree from the University of Alberta, Anuj has been helping Albertans become first time homeowners, and helped Alberta Homeowners save money on their mortgages for over a decade.