Whether you are taking over the mortgage on your current home or buying yourself a new house, you will want to walk carefully through the mortgage application process as you divorce. To save money, you want a mortgage with the lowest costs and interest rate. There is no guarantee you'll get the mortgage you want but by planning ahead and being proactive there's a better chance you will.
Put yourself in the shoes of the lender. If you were lending out a significant amount of money you would want to find someone who is a low risk so the chances are the loan will be re-paid. How do you show yourself to be that person? Keep in mind the lender will verify all the information you give it so honesty is the best policy (that and fraudulently trying to get a mortgage could land you in jail). Some initial questions you might be asking yourself:
1. Do I know a good mortgage broker?
2. How much will you need to borrow?
3. How much equity will you have in the house?
4. Do you have a down payment? Is that money coming to you from your divorce distribution?
5. Are you buying out your spouse and is that buyout amount going to be part of your mortgage?
6. What type of mortgage do you want? A 30 year fixed is going to put you in a different financial situation than a 7 year arm.
7. Will you need a cosigner to obtain a mortgage?
There are great questions that will be answered early in the process. In the beginning, focusing your effort and attention in these areas can greatly help your chances for success:
1. What is your current and expected future income and expenses?
It's not just the mortgage payment you need to think about. There will be bills for taxes, insurance, utilities, repairs and maintenance along with all the other expenses that come with living your life. If you can afford to buy a home what mortgage payment can you afford?
2. What is your credit score?
To find out get a free copy of your credit report. You need to not only look for your FICO score but look at all the information on the report. Is it accurate? Are there signs you're the victim of identity theft? Did you timely pay bills that are listed as late or unpaid? By correcting mistakes on the report your score should increase.
A minimum FICO score of 730 should qualify you for the lowest interest rates. The higher the score, the lower your rate which could save you thousands of dollars in the long run. If your credit score isn't what you'd like it to be, showing a steady income and cash reserves could help you qualify for a mortgage. A timely payment history will also help.
3. How much do you have for a down payment?
If you can put down 20% to 25% you should get a better interest rate because the bank will see you as a better risk. However, if you do not have the cash on hand, you may run into a problem. If we know your financial needs before we start to negotiate your divorce we are in a much better position to get what you need.
4. Do you mind getting on the phone?
You need to reach out to lenders but the good news is the mortgage business is highly competitive. I can suggest some mortgage resources for you. You can also ask friends, family, co-workers who provided their mortgages and whether they had a good experience. Go on the internet, compare lenders and look at more than interest rates because you also need to consider the points, application fees, appraisal fees and the terms of different loan programs. Narrow down your choices and bargain. Let the mortgage originator know the best mortgage you can get from another lender and see if he or she can beat it.
5. Is your information organized?
Apply for the mortgage and be prepared for the lender to run a credit check. You will need to provide information relating to your job history, income, assets, liabilities, investments, other mortgages and loans as well as household expenses.
Getting a mortgage is not just something that happens or not. You need to take an active role in order to obtain a mortgage with the best possible terms. Doing some homework could result in substantial savings in the long run.