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Whether to divorce the house

Monday, July 16, 2018

At the end of the marriage, the couple's house is often one of their largest assets. It can also be the greatest source of property division disputes for couples in Texas. Often, spouses want to continue ownership of the house or buy a new home with the proceeds of a divorce settlement or decree.

These decisions should be based upon sound financial reasoning, which should take into consideration numerous issues. These include the home's appraised value, the spouse's employment, whether refinancing is affordable, whether a spouse can buy the other spouse's equity and whether the other spouse agrees to postpone the sale until some of these issues are resolved. Additionally, the amount of child support and alimony awarded has financial ramifications for both spouses.

Mortgage issues can have consequences after the divorce. Applying for a mortgage is more difficult after the marriage is terminated. Banks often wait several months after spousal support is paid before it is considered as income. The normal time is six months of alimony payment receipts, but sometimes a mortgage may be approved within three months and in less than three months for individual cases.

Spouses may have lower credit scores because of late or unpaid bills associated with their stress and pre-occupation with the divorce. Sometimes bills are unpaid because the responsible spouse moved and the bills were not forwarded.

These couples may not meet the minimum 580 credit score for qualifying for a mortgage. This is also compounded with insufficient income. A co-signer may overcome these issues by supporting the ratio of debt to income.

Employment is also a consideration. A purely commissioned-based job or part-time position may not generate sufficient income for mortgage qualification. A bank may require submission of two years of tax returns showing commissions, part-time employment income and bonuses to demonstrate consistent income.

Underwriters will review a spouse's income, assets, credit and ratio of debt to income. Unfortunately, divorce can impact each of these issues. An attorney can help spouses determine whether it is advisable to keep their home.

Source: Huffington Post, "It's harder to divorce the house than the spouse!" Ashley Tate Cooper, July 17, 2017

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