Why Would a Mortgage Lender Need Your Divorce Decree?
- 3 reasons a mortgage lender needs your divorce decree
- How to prepare before contacting a lender
Divorces involve plenty of paperwork, and most people like to keep the details private. But one document could be important if you want to borrow money for a home. Your mortgage lender might ask to see your divorce decree.
A divorce decree is much more detailed than a standard divorce certificate. Your decree contains all of the details about the arrangements you made during your divorce. If you’re hoping to start a new loan for a home after your divorce, your lender will likely ask for this document as part of the application document.
3 reasons a mortgage lender needs your divorce decree
Your mortgage lender isn't asking for your divorce decree to be intrusive. In fact, there are three very good reasons for an inspection, including the following:
1. Qualify for the loan
Mortgage lenders look for a debt-to-income ratio less than or equal to 36%. Details in your divorce decree could help you prove that you meet these numbers or can meet them in the future.
For example, you may have paperwork from your bank detailing how much you have in both checking and savings. But your divorce decree proves that you'll soon get $350 per month in spousal support, significantly changing your financial future.
2. Prove you can repay the loan
Almost 4% of people who take out loans don't repay them. A foreclosure remains on your credit history, and your mortgage lender will see that when assessing your loan suitability. But your divorce decree could help you prove that you can keep the promises you make.
For example, your paperwork could include information about the assets you will keep after the divorce, such as your retirement accounts. This balance could work as equity for the new loan.
3. Highlight that your marriage is over
In many states, a home purchase made during a marriage is automatically shared with both people. If you attempt to buy a home before your marriage is technically over, your lender could be confused about where to send bills and who is responsible for them. A divorce decree includes the formal date your marriage is over.
How to prepare before contacting a lender
Your next steps vary depending on where you are in the divorce process.
If your split is final, you can contact the clerk in the courthouse that processed your case. Ask for a formal copy of your divorce decree, stamped and signed by officials. This is the document your lender will need as part of the application process.
If your split isn't yet final, you can give your lender a copy of your divorce documents as they are right now. Some lenders like to review these preliminary forms and offer advice on your settlement. With their help, you can make arrangements that will allow you to qualify for a loan easily when things are final.
Be open and honest with your lender about where you are in the divorce process. Work with them in partnership, and your loan should be approved without issue.
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ReferencesDivorce Certificate. Oregon Health Authority.
How Much Debt Is Too Much? Citizens.
Mortgage Delinquency Rates in the United States from 2000 to Third Quarter 2022. (January 2023). Statista.
Get a Copy of Your Divorce Record. Commonwealth of Massachusetts.