Real Estate Home Mortgages/home purchase after divorce
Eric, thank you very much for taking my question. I look forward to hearing from you.
My husband and I are planning to divorce within 3 months and I am trying to figure out if/how I could possibly buy a home on my own after the divorce finalizes.
We are in agreement on everything - husband and I will be business partners, we already own 5 rental homes together (all mortgaged, which means there are 5 financed properties we have jointly), have had them for 5-10 years and will continue to hold titles and loans in both names. The cash flow from these rentals is positive, however, if lender considers only 75% of rental income for DTI calculation, we would show about $1000 negative net flow per month. As after divorce I will be half owner of these properties, would only half of that $1000 count against me for DTI or would the whole $1000 be considered towards my monthly debt?
Second question, with income of about $4500 from my W-2 job, (plus $300 a month car lease), can I qualify to buy a home as primary residence for myself? Would FHA be a good option for me?
I have never used FHA before.
Any ideas how I can own a home rather than have to rent after divorce? Since we have not yet signed divorce papers, any advice with regards to structuring the divorce to make it easier to own homes in future?
Thank you in advance for your guidance.
As to question #1, here is the way a loan underwriter would look at it: Unless there is a Court order that makes you responsible for only one half of the negative cashflow, you are jointly and severally responsible for it (it means that if one of you, due to some unforeseen circumstances, cannot come up with his/her share of the negative cashflow, the other one bears the responsibility for the payment). The underwriter will look at you as being responsible for the entire $1,000.
However, the underwriter might be working with more liberal guidelines which would allow him to use only one half as your responsibility.
As to question #2, Assuming monthly debts of $500 (negative cashflow) and $300 (car lease), you should be able to qualify for a loan of about $175,000. The down payment you put will determine the total purchase price. Also, unless you put down a 20% down payment you will have to add PMI to your monthly payment. FHA loans also come with a mortgage insurance payment, similar to PMI. To be conservative, I used a 4.00% mortgage interest rate in qualifying you.
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