Today, I’m excited to share a guest post from Suzanne Cramer with CareOne Debt Relief Services where she blogs about divorce and finance. As a single mother, Suzanne has experienced many of the financial challenges of divorce first-hand. She’s also been a guest on Since My Divorce a few months ago and you can read her story here.
Time has passed, the scars from divorce are starting to heal and you’re ready to move forward with your life. Part of that life may include a move into your very own home. As you progress through divorce you realize several things and financial adjustment is sure to be one of them.
Successfully applying for and qualifying for a mortgage is the first step to home ownership. While you may have had a marital home with a mortgage, it was probably based on both you and your spouse, or just your spouse. Qualifying for a mortgage on your own may prove to be a daunting task especially in today’s tight lending market.
If child support or alimony is your sole source of income it may be nearly impossible to qualify for a loan, but lets take a look at the facts…
As with all other documentation for mortgage applications, child support verification is no different; you have to be able to prove it exists and is received on a regular basis.
In order to use the child support on your mortgage application it must meet two specific qualifications.
1. You can prove that it has been paid, on time for the last year.
2. You can prove that you will receive it for an additional three years.
In my situation I was not able to prove either one and therefore, was not able to include child support as income to help qualify me. I was not receiving regular payments and they were all paid in cash–no paper trail.
So what kind of a paper trail is a lender looking for? The only acceptable proof are canceled checks or a print out from the court, if your support is court ordered and being processed through the domestic relations system. If canceled checks are not easily obtainable, you can make copies of checks and bank statements that show child support payments being regularly deposited.
If your children are nearing the child support cut off of their eighteenth birthday, the lender typically won’t allow you to count it on your application. Not sure what your support order states? Take a close look, the ages of the children and when the support will stop are normally spelled out in your court order. Proof is key so be sure to have your paperwork.
Proof of child support is one of the many forms of documentation you will need. Here is a checklist to help you prepare to meet with your lender:
- List of all debts. Most loan applications will ask you to list all your debts and how much you spend each month on everything from rent or your current mortgage, to credit cards, car loans and utilities. You won’t submit the actual bills but, the lender will check that information against your credit report.
- Income from your job. You will need to produce W2s from the last two years as well as your most recent pay stub. If you have more than one job, bring in the W2s and pay stubs from all of them.
- Self-employed income. If you are self-employed, you will need your last two-year’s tax returns, both state and federal. If you haven’t been self employed for at least 2 years it may be difficult to qualify. (If you have a job and are self-employed, you’ll need documentation for both.)
- Unemployment income. If you are seasonally employed and regularly laid off your unemployment insurance payments could be counted as part of your regular income. You will need a check stub, a photocopy of your most recent check, or your bank statement showing the deposit.
- Disability income. Lenders will count disability income if you can prove you’ll be collecting it for at least three years. You’ll also need to document the amount you are being paid each month with a check stub, a photocopy of your most recent check, or a bank statement showing the deposit.
- Assets. If you have CDs, savings accounts, 401ks, stocks, bonds, real estate or anything else of value, you’ll need proof of ownership and value.
- Down payment assistance. If you are getting down payment assistance from a friend or family member, you will need a gift letter from the giver stating that the money is not a loan, but a gift that does not have to be paid back.
Big list–keep in mind the lender may ask for even more! Today’s tight lending has led to major scrutiny on mortgage applications. If you feel you are ready and can afford it, go for it! The process is tough but well worth getting a place to call your own.
If mortgage payments turn out to be a stretch consider waiting until you are more financially secure. Jumping in before you are ready could lead you down a path you don’t want to go.
Thankfully I was gainfully employed and had enough assets to back me up, eventually I was approved, but not without a struggle.
Have questions or want to know more about home ownership? Check out this post.
Suzanne is a certified credit counselor and a Social Media Specialist for CareOne Debt Relief Services. Suzanne writes for Divorce, Debt and Finances and A Straight Talk on Debt. Follow Suzanne on Twitter @ADivorcedMom and @AskCareOne where she shares her insights on divorce and managing your finances.
The Divorce Coach Says
This applies not just to initial mortgage applications but also refinances. I had got the mortgage for my post-divorce house about nine months before the financial meltdown without income verification but had a very difficult time refinancing to take advantage of the lower interest rates. I forget all the ins and outs but my particular circumstances didn’t fit the standard rules and the meltdown meant the underwriters were being ultra-conservative. I persevered, calling my local bank’s mortgage adviser every few months and was eventually successful.
How did being divorced affect your mortgage application? Did you have to jump through any extra hoops you weren’t expecting?