FICO scores, debt-to-income ratios, and credit history aren't the only things that can factor in when the lender is gathering data from your FHA mortgage loan application. Borrowers who are divorced may experience additional requests from the lender for paperwork or supporting documentation.
We get questions about issues like these quite frequently. Here's one recent example from the comments section:
"Legally divorced in SC for close to seven years. There was no alimony, no children, and bills were split. The underwriters for an FHA re-finance are demanding a copy of the Separate Maintenance and Property agreement filed at the time of separation, a full year and a half before the divorce. I dont have a copy of it, so I have to either buy one online or miss a days work to go to the County Courthouse in another city. What is the purpose of this?"
The frustration is understandable, but in many cases the loan officer may be bound to request such information for a variety of reasons including lender standards.
Since the requirements of financial institutions may vary, what is required at one lender may not be at another. But the lender IS required, regardless of the institution processing the loan, is to evaluate the borrower's debt-to-income ratio.
Anything that could affect that ratio, including a monthly financial obligation to pay maintenance, child supprt, etc. will need to be verified by the lender.
From HUD 4000.1: "The Mortgagee must obtain the official signed divorce decree, separation agreement, maintenance agreement, or other legal order. The Mortgagee must also obtain the Borrowers pay stubs covering no less than 28 consecutive Days to verify whether the Borrower is subject to any order of garnishment relating to the Alimony, Child Support, and Maintenance."
Additionally, the laws of a borrower's state may affect the mortgage loan transaction. Do you live in a community property state? Community property laws dictate how financial obligations incurred during the legal marriage are to be divided in a divorce. This can also affect the debt-to-income ratio, so the lender will need to verify any financial obligations the borrower has as a result, where applicable.
Divorce is not a barrier to an FHA mortgage. But borrowers who have legally binding agreements as to the disposition and payment of debts or other issues should expect the lender to request documentation of these agreements as part of the loan application process.
