A reader asks, “I was divorced 5 years ago but he stayed in the house. He is always behind on the payments and it affects my credit. I have divorce papers that state he is solely responsible for the house and payment. Also he was court ordered to get the house in his name but hasnt and the courts wont do anything about it but extend his time. Can I buy a house even though because of his late payments has made my credit score less than 500. How do I handle this?”
This reader question should be answered by legal counsel-giving legal advice is outside the scope of this blog, except to recommend that when legal help is needed that it’s best to get the services of someone with specific expertise in the applicable laws in your case.
The applicable laws that may affect a circumstance like the one mentioned in the reader question vary from state to state. It’s not possible to give a generalized answer to questions like these except to remind borrowers that state laws are not uniform across the country.
What may apply in one state in cases like these may not in another. A borrower or co-borrower should know or take the time to learn how such laws might affect their transaction-being a fully informed borrower is important.
Borrowers should know that these state laws play big role in determining how to proceed with the legal process. Community property states, for example, have laws that govern how debts accumulated in a legal marriage are to be divided between the parties involved in a divorce.
The procedures for dividing the financial responsibility for a mortgage and other major debt could require the assistance of trained legal counsel in some cases, or a simple written and legally formalized document in others.
The laws of your state will determine how complicated these agreements might have to be, and how they are to be enforced.
Buying property with a bad credit rating is difficult, regardless of divorce or other circumstances. FHA loan minimum standards include provisions for borrowers with FICO scores between 500-579, but with a 10% down payment requirement. However, borrowers will find that these FHA minimums are not the only standards at work in an FHA loan transaction. Lender requirements also apply.
Many lenders require FICO scores in the mid-600s, so it is important to anticipate that when considering your FHA mortgage loan options.
One good step for potential FHA borrowers? Calling the FHA directly at their toll-free number (1-800 CALL FHA) to request a referral to a local, HUD approved housing counselor who can help with pre-purchase planning and advice. That advice may include help on issues of credit, budgeting, and becoming a good credit risk.