Profile picture for user6242295

Divorce to get a mortgage

Not sure if this would actually work, but I thought it would be a clever idea. 1 1/2 years ago I went through a short sale. My wife was not on the mortgage therefore is able to currently obtain one. The problem is she doesnt make enough on her own to get a decent loan amount. We also are not able to get a cosigner for her. So my question is, if we get divorced on purpose and I pay her alimony will this count as income and in turn allow for a bigger loan? If this would work are there any stipulations? I'm really not in favor of this idea, but I'm out of ideas at this point and we need a house. Please help.
  • February 19 - Yorkville
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Answers (9)

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Profile picture for KennyStigler
It would not work, at least not in the short term, because most lenders want to see a track record of at least 2 years for any type of income you would like them to consider for qualifying purposes. By then, you'll be able to purchase a home again with FHA.  Plus would also need a court order for the alimony and evidence that it is being received in a timely manner (cancelled checks)...underwriters will ask for this to see that it's legit.

Then all the while are you going to be able to maintain two separate residences? Any sign that you are still living together will give you away. Think about the addresses that appear on Bank Statements, Tax returns, pay stubs, credit reports...even the very checks you use to give her the Alimony payments. These are all documents that they will request that have addresses on them. This may be costly...not to mention that you are walking a very fine line with the law. I don't recommend it. 

Another pitfall that doesn't usually pop up until the last second is that if they can link your wife to the previous short sale in anyway they will count it as if it was hers at many banks. They can do this because on the loan application it requires you to include all residences for the past 2 years. Even happen to forget to mention to previous addresses, your credit report will give you away because it lists many of your past addresses and timeframes there. Then all you need is for an underwriter to research that particular address and see that she was on Title. Even if she wasn't on title, at some places the fact that she was married at the time and benefitted from the short sale will be good enough for them to decline the loan on the basis of being involved in a short sale. It would be a good idea to mention this to your loan officer and have him check with underwriters ahead of time...

Here's a solution that may work for you. If you can prove that at at the time of the short sale the household suffered from a 20% decline in income or job loss for a period of 6 months or more then you may be able to purchase with a FHA loan after only 1 year from the Short Sale Date. Lots of paperwork involved in documenting this but it may be an option for you...Good Luck. 
  • February 19
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There are mortgage products out there that will allow you and your wife to get a loan together despite your short sale history (yes, there are assumptions such as your credit being in ok shape now). Engage a lender and realtor and follow their counsel to help you through the process.
  • March 02
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The crazy thing here is that after 2 years from shortsale, FHA and VA loans open up. You must be some kind of world record speed divorcer. I've never seen a divorce go faster than 6 months, which is all you need to wait anyways. Have some patience and keep your eye on the future, it's closer than you think. 
  • February 20
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" it is impossible to get an accurate analysis on this forum."

I disagree, IMHO you received the best analysis available which is what this forum is for. Contacting more Lenders until you hear what you want to hear is different.  
  • February 20
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This is also known as mortgage fraud. I agree, great creative thinking but there is a reason these guidelines are in place. You don't NEED a house. You need a place to live. You will have to rent until sufficient time passes. 
  • February 20
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Great answer by Kenny! I just wanted to comment how impressed I am with Kenny as well as how impressed I am by the posters ability to "think outside the box"! something tells me your going to be OK in the end with a brain like that :)

Best Wishes to you and Mrs.
  • February 20
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Speak with a few lenders to see what your options might be. They do not charge and it is impossible to get an accurate analysis on this forum. My we site has some lender references.
  • February 20
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Your plan will not work. Clever has already been written into the guidelines.

Assuming a Conventional loan, the rough guidelines begin after you have a legal separation agreement or divorce decree: "Document no less than six months of the borrower's most recent regular receipt of the full
payment." - per Fannie Mae guidelines. FHA is actually stricter, requiring proof of receiving alimony for 12 months. In both examples, the divorce decree must indicate that this will continue for a minimum of 3 years from the date of the mortgage.

You are thinking too hard about this. After a short sale, you can purchase again (assuming credit is great and re-established). Shortest wait periods as follows:

2 Yrs - 20% down with Fannie Mae
3 Yrs - FHA - Regular down payment required of 3.5%

1 Yr -   FHA - Back to Work program. You must be able to document a loss of 20% or more to income for a sustained period of 6+ months. This is called an "Economic Event." This will generally only work if you had a loss of job or a drop in income that was completely involuntary. Credit has to be good before the "Event" and absolutely perfect afterwards.
  • February 19
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Profile picture for wetdawgs
Are you prepared to live apart for the next several years and support two households?   No.... well, perhaps there is a faster solution.

Why not ask the question "I had a short sale 1.5 years ago, it happened because of xxxxx and we always up to date on payments, I have 20% down so when can I qualify for a mortgage?".

Remember your mother and father asking you about "need" vs "want"?    I hear a parental tone in the background when you write "we need a house"!

  • February 19
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