If you are divorced, get your name off the mortgage.

I'm sure everyone knows that if you are late on your mortgage, it will hurt your credit. Nothing new there. This blog is about how much damage they can do if your name is on another mortgage and that person is late. As you can assume, it hurts your credit, which in some cases, could disqualify you from receiving a loan. This blog is about specifically divorce couples. A lot of times, when a couple gets divorced, they had both of their names on mortgage. After the divorce, they don’t make any changes to the loan, so both names remain, even though one person has clearly moved out and is probably looking for his or her own home. If the person who remained in the original home is late, it will hurt that persons credit and also the other spouse who has already moved out. It also puts other limitation on future loans. With FHA, which allows 1 late payment of 30 days in the past 12 months, it will disqualify from you doing a cash out. You will only be allowed to refi as a rate and term. If the spouse who moved out is looking to buy a new home, he may need to qualify carrying the debt on the original home. Also, with a current late, especially in this market, any borrower may need to wait for a year before they can complete a refi. If you need access to equity, and to lower your payment, this could cause financial problems, while you wait for the year to expire. I mention 1 year, because on the conventional side of things, banks do not want to see any mortgage lates in the last 12 months. Some banks will go as long as 24 months. I believe the best option, is to refi the house for the person who will be leaving there. I know that sometimes that spouse might not qualify, but if you are not living there and they are late, it could have very serious ramifications for the spouse who has moved out.

DC Sr. Mortgage Broker
Montgomery County, MD Homes