Getting a Mortgage While Separated Without Cancelled Checks

The end of a marriage is a trying time for a family and it typically doesn’t happen often in someone’s life, so it is hard to prepare for what happens or needs to happen.  In addition to the emotional toll it places on a family, a separation can also wreak havoc on a family’s finances as well.  Once you get a separation agreement completed, the language may sound pretty simple for what to do.  Maybe one person take over this debt, another take over the house, or even one spouse pay the other the equity in the house.  But then once you start trying to actually get that refinance, pay off the ex spouse, or purchase another home, it is tougher than you think.

Separation Agreement and Credit Tipsseparation agreement

One of the most common explanations for credit issues is divorce.  Often in a legal separation there is a lot of anger and resent towards the other person.  There may even be the desire “to get” the other person so that they suffer!  But, in doing this to the other person usually affects both sides when it comes to credit.  Keep in mind that if credit is joint and one party doesn’t pay the bill, it affects both on the account.  Therefore, credit scores drop and it is difficult to refinance or to buy another house.  So, if at all possible, treat the financial side of a separation in a way that hopefully doesn’t ruin finances for years to come.  Suggestions include…

  1. Pay the bills on time
  2. Close joint accounts to future transactions
  3. Open new cards individually
  4. Keep an eye on your credit often – see how
  5. Refinance quickly

First of all, no matter who is required to pay what, make sure the payments are made on time.  Paying late will hurt a credit score dramatically for both parties.  Just to be safe, any joint accounts should be closed for future charges.  Too often we hear that an ex will continue to charge on a card and leave the balance for the other to pay.  So, even if you still trust the other, get it closed.  For credit score reasons, having a credit card can account for 30% of a credit score.  Therefore, make sure that getting a card individually is a top priority. credit tips after legal separation This is not only important for emergencies, but not having a credit card could eventually lower scores.  Keep in mind to use the cards in a way to maximize credit scores though!

How to Have Walk on Water Credit!

Again, even if you trust the other person it is best to keep an eye on your credit.  You never know what could happen.  Plus, we have seen too often where an ex has opened an account in the other’s name after separation, run up a balance, and left it to be paid by the other.  Getting an alert and/or freeze placed on your credit is something to consider.  Finally, a separation agreement often requires the refinance of any mortgages that are joint.  So, let’s discuss how this works.

Separation Agreement Requires Refinance

Since there is one household becoming two, assets and debts often must be split up.  Separation agreement requirements may include…

  • Quit claim deed – removing one from title
  • Refinancing mortgage – going from joint credit to just one name
  • Equitable distribution – paying one for a portion of home equity
  • Selling the house – selling to divide equity and/or pay off debt

Have you been told that you need to provide 12 months cancelled checks to exclude a mortgage payment from your debt ratio?  We may have a solution!

Separation Agreement NC Option – No Cancelled Checks!

First of all, the state you live in determines if this option may be used.  Here is a common situation that separated couples run into.  The home is awarded to an ex spouse, the ex is required to pay the mortgage, you want to buy a new home, a lender requires 12 months of cancelled checks proving the ex pays the mortgage to exclude it from your debt ratios.  Uh oh!  This is often a problem!  Either the ex will not provide the checks or 12 months have not elapsed yet.

Separation Agreement Mortgage Requirement

Remember, this does depend on the state and it can help on most types of mortgages!  In NC, as long as there is a legal separation agreement that is signed and notarized by both parties, cancelled checks is not required in most scenarios (USDA always requires cancelled checks)!  How does this help?  Well, if you just became separated and want to buy a home, there is no way to have 12 months of checks.  That is where this solutions may help tremendously.

Did Your Ex Handle the Mortgage Last Time?

Do you feel like a first time buyer?  It is quite common for one person to handle the mortgage process, at least for the most part.  So the other spouse may be a homeowner with a mortgage, but not know anything that happened other than the results.  Although not a first time buyer, experience-wise you might as well be.  Our guidance and process helps first time buyers tremendously, so trust us to help walk you through a mortgage after separation.  Also, check out our article, First time buyer admits “If I had only known this!”.

Posted by Dietchi Thomas on


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