With the hard economic times people are facing – I guess it’s not surprising that we are seeing many more people who want to purchase a home – but have a messy divorce in their recent history. Here are some tips for folks who have questions about Divorce and Credit, especially what they need to know so they can buy another house in NC.
When you have a Dissolution of Marriage where one party says they will take responsibility for the account… that’s nice for the courts… but it doesn’t mean “didly-squat” (that’s right I said it!) when it comes to your credit report.
Just because someone SAYS they are going to take over the payments on a certain account does not MEAN that it will come off of your credit report! In Fact, unless you ACTUALLY have yourself removed from the account, you are still obligated for that debt.
This means that when you go to apply for a mortgage, we will be counting those -payments against you. We strongly suggest that you consider closing any joint accounts immediately that are not in use and removing your name from any accounts that you are a signer on. If your name remains on an account they have, even if they pay the debts on time, if the balances exceed 30% of the limit on a credit card, your credit score will suffer too.
Let’s think about that in terms of a mortgage. You Quick Deed property to the other spouse (really this is referred to as a QuitClaim) , and they agree to make payments. In NC – when you purchase a home, you sign a Deed of Trust AND a Note.
The Quick Claim Deed takes care of only ONE part of the agreement – you must still be taken off of the Note, or you are STILL Legal Obligated for the Mortgage Loan. In order for THAT to happen – either the party who is keeping the home must pay the note off completely – or they must refinance the mortgage so that it is solely in their name. If you are in a situation where selling the home is going to mean a Short Sale, then negotiate that loss in equity into your future financial picture.
There are FHA mortgage loan programs for those who have been through a trauma, like divorce, who have some credit issues as a result. In some cases, we can make loans to folks who have gotten back on their feet, and have credit scores between 619 and 580. Additionally, you might want to think about adding a non-owner occupied co-borrower so that you can buy a house quicker after a divorce.
If you are a single parent, who is looking for information on how you can purchase the next house, here’s some more information on FHA Guidelines for Single Parents. There are Single Parent Grants available to help with down payment – call us for details!
If you need more information about Divorce and Credit – call us! Steve Thorne 919-649-5058 We can help you buy a house, and counsel you on the steps you need to take to protect yourself.