One of the key steps in the divorce process is finding a new place to live. Once you and your partner have decided to split you will probably be wanting to find your own place sooner rather than later.
If you are already a homeowner, you might be thinking about trying to stay in the housing market and buying something new. While this is a great idea in principle, there is a very important document you need to have on hand before going out in search of a new home. A separation agreement.
As a mortgage agent I can’t stress the importance of a finalized separation agreement enough. Without one it will be very difficult for you to get a mortgage for a new home. The separation agreement will outline things like what is being done with the matrimonial home, child support and alimony. All these will directly affect your ability to qualify for a mortgage, regardless of whether you go with one of the “big 5” banks or another mortgage company.
If you already own a home with your ex, the separation agreement will outline whether the house is going to be sold or whether it is going to be transferred to your partner. This is important because most lenders will want to see that either the sale of the house or the transfer of the property is done before the closing date on a new home.
Child support and alimony
Child support payments and alimony are two other items that a lender will want to see outlined in a separation agreement. This is because they can either be counted as income or debt, depending on which side of the coin you are sitting on. Sometimes income from child support or alimony is key to being able to qualify for a mortgage and a lender will want to see that on paper. If you are the one paying alimony or child support this debt is also important information for lenders as they review your file. In the end it all comes down to balancing your income with your debts and in a divorce scenario with children, this almost always includes child support and/or alimony.
Don’t put the cart before the horse
It may be tempting to start looking for houses as soon as you and your partner decide to split, but I always advise people to take a step back and make sure your separation agreement is finalized BEFORE you start shopping around. Without that document you will have no way of knowing what type of mortgage you qualify for, and prequalifying for a mortgage is key. If you start seeing houses before you have figured out your budget, you will risk finding your dream house and realizing later that you can’t afford it.
There is no doubt about it. Going through a divorce is difficult and figuring out new living arrangements can be stressful. I definitely recommend talking to me at the beginning of the process so I can guide you through what I will need to help you buy the home. Having a finalized separation agreement is almost always necessary to complete the purchase but I can help you from the start.