Question
My Credit Is Bad Because I Had A Divorce, Can I Still Get A Mortgage?
Answer
Well, this may not be the best liked answer that I have given so far, but divorce is not always a good excuse for bad credit. Sure, everyone knows that divorce is an ugly thing and a lot of ugly things happen between two departing quarreling spouses. Even still, trying to get a mortgage with credit challenges coming from a divorce will take a little work to approval from your underwriter.
FHA Mortgage Is Likely Your Best Choice
With past credit problems, especially if they have happened within the past couple of years, you should probably pursue mortgage financing from an FHA approved lender. FHA has a lot more flexibility in how they underwrite mortgages than conventional lenders backed by Fannie Mae and Freddie Mac.
Tell The Facts Behind The Divorce
Your written explanation can make a difference in getting your not so great credit approved by an underwriter. Tell the truth behind the divorce. The underwriter is more interested in what led to the divorce than knowing that you had one. Maybe what led to the divorce was that your spouse got addicted to the crack pipe or became a meth addict.
Who knows what your story is, but telling the truth behind the scenes is what counts. Don’t worry, your letter of explanation is not going to show up in the public record where your spouse can see it and come after you for defamation of character. Merely, your underwriter will use your explanation to look at a couple of factors.
Factors That Impact Getting Your Loan Approved
Given that your credit history is not good from your recent divorce you will need to make sure that you right the ship as quickly as possible. Review the following suggestions as all or some of them may apply to you. These are things the underwriter will be looking for from your letter of explanation and the rest of your credit and income file information.
- A well written letter of explanation showing the cause of your divorce, not just that you had a divorce and your spouse was mean. This might not be the most comfortable thing for you to do. No one likes talking about their broiling past, but you must do so if you want to get a mortgage. Also, if you did something to cause the divorce, make sure that you say that too. Be honest and let the underwriter know that it was a mistake if this is the case. The other spouse isn’t always the “bad” spouse.
- Have you taken the steps to separate out your joint credit accounts? If not, start the process. This might take some work, but document everything you do and try to do. Also, you should probably start some of your own credit accounts is possible so that you can re establish your credit. Making an effort to correct things from the past will go a long way to getting the approving eye of an underwriter.
- Have you moved out of the home? Are you renting an apartment or another home? If so to either of these questions, make sure that you are paying rent with a check. Why a check? For starters, if your credit is a little shaky and you are trying to get an FHA mortgage you will most likely have to prove your rent and/or mortgage history if you do not get an automated approval. If for any reason you need to have your file manually underwritten – which happens a lot in cases of weaker credit reports – you will most likely have to prove your housing payments and that they have been made on time as agreed.
The easiest way to prove your rent history is to show cancelled checks. You can’t prove the validity of a cash receipt. You also can’t accept a written letter by a private owner – at least not without a lot of other strong supporting documentation and compensating factors that make you an incredibly low credit risk. Cancelled checks prove your payment history. Most likely you will need at least 6 months of them.
If you live in an apartment complex, then a verification of rent form supplied directly to the management company from the loan processor will often do the trick.
Hopefully these tips answer your questions about getting a mortgage following your divorce. For further information about improving your credit please review our Basic Steps To Self Credit Repair. Feel free to ask any additional questions that may come up.
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