Not only are couples struggling with the emotional and financial burden of separating their lives, but they also have to figure out how to divide their assets, debts, and possessions. One aspect of a divorce settlement that often goes overlooked is how it affects an individual’s ability to take out a loan or refinance their home. Thankfully, the Federal Housing Administration (FHA) has several loan programs specifically designed to help those going through a divorce.
The first program is the FHA Cash-Out Refinance Loan. This loan allows individuals to refinance their current mortgages and receive cash back at the same time. The cash may then be used to pay off any debts or cover the costs associated with the divorce. This loan is an ideal option for couples that are looking to divide their marital home before selling it. As long as the mortgage is paid off, the home can simply be transferred to the owner who is keeping the home and the other spouse does not need to sign or cosign the loan.
Another loan available through the FHA is the Streamlined 203(k) Loan. This loan is designed for individuals who are looking to purchase a home of their own following a divorce or who are interested in making improvements to their current home. It allows the borrower to finance both the purchase price and the cost of repairs or improvements up to $35,000. The loan feature no minimum credit score requirements and can be an excellent option for those who are starting over and want to build equity in their newly acquired property.
For those who are struggling to make their mortgage payments due to increased expenses resulting from the divorce, the FHA Loss Mitigation Program is available. This program provides assistance to borrowers that are delinquent on their mortgage or who are facing foreclosure and need help covering the cost of getting caught up on their payments. In addition to helping borrowers remain in their homes, the program also offers counseling services to help borrowers cope with the financial stress associated with going through a divorce.
Finally, the FHA Secure Refinancing Program is intended for borrowers whose incomes have decreased following a divorce. This program allows borrowers to refinance their mortgages without having to provide proof of income or a new credit report. This can be a great option for individuals who previously qualified for a loan based on two sets of incomes, but now need to refinance with just one.
For couples going through a divorce, the FHA offers several loan programs that can help them transition into their new lives. Whether a couple is looking to refinance their current mortgage, buy a new home after the divorce, or simply stay in their home while catching up on overdue payments, the FHA has resources available to help. With these loan programs, individuals can rest assured that they will have the financial support they need to start anew.
This article was contributed on Nov 15, 2023