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DivorceHere’s a quick tip.

If you are divorcing or already divorced, and the divorce decree requires that you remove your spouse from the loan on the property AND pay them their equity AND you’ve got a few credit problems, don’t panic. For an FHA refinance, this is still considered a rate/term refinance even though you are paying out cash to you ex-spouse.

This is significant because most other types of loan place a lot of extra restrictions and higher qualifying requirements on a cash out refinance. Using an FHA loan, you can accomplish your goal and still have a low fixed rate mortgage.

On the flip side of this issue. If you are the spouse who needs to be taken off the loan, do not just move on and forget it. If your ex-spouse later has credit problems those problems will haunt you as well. I have many horror stories of unknown foreclosures showing up on a person’s credit report when they get ready to buy a home. Also, if you want to protect your credit score, make sure that you are no longer on joint credit cards with your ex-spouse. If your ex-spouse qualifies, an FHA cash out refinance can be done


Filed under: Consumer Information • HUD Regulations • How FHA Works • Refinancing

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