Tips
to Get the Best Results on Mortgage Financing During Divorce
By Donna Ranieri on 3/13/2013
Although the financial markets have tightened lending guidelines and financing requirements over the last few years, the right advice when applying for your loan can make a big difference, especially during divorce proceedings.
Not all loans are approved. Even if your loan is not approved immediately, you can start structuring your income and debt to get you ready for your future financing needs. Here are a few things to understand and prepare for when applying for a mortgage;
- Loan-to-Value Ratio: The loan-to-value ratio (LTV) is the percentage of the appraised value of the real estate that you are trying to finance. For example, if you are trying to finance a home that costs $100,000, and want to borrow $75,000, your LTV is 75%. Lenders generally don’t like a high LTV ratio. The higher the ratio, the harder it normally is to qualify for a mortgage.
- Credit-to-Debt Ratio: Your credit score can be affected negatively, which in turn affects your mortgage loan if you have a high credit-to-debt ratio. The ratio is figured by dividing the amount of credit available to you on a credit card or auto loan, and dividing it by how much you are currently owe. High debt loads make a borrower less attractive to many lenders. Try to keep your debt under 50% of what is available to you. Lenders will appreciate it, and you will be more likely to get approved for a mortgage.
- No Credit or Bad Credit: Few things can derail your mortgage loan approval like negative credit issues. Having no credit record can sometimes present as much difficulty with your loan approval as having negative credit. With no record of timely loan payments in your credit history, a lender is unable to determine your likelihood to repay the new mortgage. Some lenders and loan programs may consider other records of payment, like utility bills and rent reports from your landlord. That is called alternative credit.
- Verification of Income from Alimony or Child Support: You will need to show that your income from child support, alimony or both will last for at least 3 years. You would also need to have received the support for the last 6 months prior to qualifying for a mortgage. The lender will require the divorce decree or property settlement agreement to match the exact amounts that you are receiving.
Please consult with a Loan Officer experienced in Divorce
Lending to discuss your specific situation.
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