Mortgage Questions You're Too Afraid to Ask: Part 1

With decades of experience in the mortgage industry, it's hard to stump our mortgage bankers. There are some questions, though, that some buyers may be too shy to ask. That's ok! We are always available to help answer the tough questions. Here are three mortgage questions you might be too afraid to ask:

1. Does my spouse have to be on the mortgage?

The short answer is no. Having a spouse as a co-borrower on a mortgage can often increase your odds for qualification if they have a good credit score, employment history, and income. In some cases, one spouse may have credit issues or complex income which could work against you when applying for a mortgage. In that case, it may be more beneficial to have only one borrower on the loan. However, both spouses may have to have their credit checked, contact your mortgage banker to find out.

If you change your mind later on, a non-borrowing spouse can be added to the home's title, or both spouses could refinance the home which will allow you to apply again as co-borrowers on the new mortgage.

2. How do I remove my ex, or myself, from our mortgage after a divorce?

If you and your spouse have decided to part ways, what to do with the house and mortgage will come up during the divorce proceedings. If the home and mortgage are assigned to one spouse in the divorce, and the other spouse moves out of the home without changing loan terms, they will most likely not be liable for any delinquent payments on the mortgage. However, it could still affect their credit score.

Just going through normal divorce process will not remove liability from either spouse on the mortgage unless you have formally changed the terms of the loan. If one or both spouses want to be removed from liability, here are a few potential solutions:

1. Sell the house - This may be the most cut and dry option. Sell the home together, and split the profit based on agreements made in court.
2. Assumption - If one spouse is going to remain in the property, they may be able to assume the mortgage as long as they are financially able. This means that the assuming spouse would take overall responsibility for making the mortgage payments. The non-assuming spouse would be released from all liability for repayment or future foreclosure.
3. Refinance - The spouse keeping the property may be able to refinance the mortgage. Similar to assuming the mortgage, refinancing will completely remove the other spouse from all liability. The refinancing spouse will have to rely solely on his or her own credit and finances in order to qualify. If you choose to go this route, we have several options that can potentially reduce your monthly mortgage payments. Give us a call today.

Contact your divorce attorney for advice on which option will be best for your situation.

3. Does owing back child support affect my home loan?

Owing back child support can affect your loan application, but not always in a negative way. It may not seem like it, but unpaid child support is considered derogatory credit, especially when it gets to the point of becoming a collection or a judgment. With all your monthly debt payments being taken into account in your overall debt-to-income-ratio (DTI), due child support becomes a part of that equation.

To a lender, debt is debt, and they treat any unpaid child support the same as credit card or student loan debt. If your DTI is within the accepted range that qualifies you for a mortgage, you may still be eligible.

Talk openly with us about issues like these, we're here to help and can only assist if we know what is going on in your life and finances. Being afraid to bring up circumstances like this, hoping that it won't come up, could sabotage your loan approval. For further reading, check out Mortgage Questions You're Too Afraid to Ask: Part 2.

If you have questions about how child support and debts affect your pre-approval, contact us or fill out the form below. It's our goal to guide you through these challenges and help you achieve your goals.