Dividing property during a divorce is sometimes difficult, and Arizona couples who own a house together and who are divorcing should understand the issues involved. In addition to the complexities of dividing a house, individuals in the middle of a divorce should also be aware that they need to be careful when purchasing a new home for themselves prior to a legal separation or divorce. In such a circumstance, the other spouse must sign a quit claim deed relinquishing any claim on the property.
The person who is awarded the house may only be able to remove the other individual from the loan if the house is sold or refinanced. This can present problems if the person with the house does not qualify for refinancing. It means that the house will continue to appear on their ex-spouse’s credit report despite the fact that the individual no longer owns it.
Even if refinancing is possible, when the house has decreased in value, it may not be possible to reimburse the ex-spouse for the full amount of the contribution. In such a case, some lenders will accept gift money as additional capital. It is usually best if this money comes from a relative.
Divorce proceedings and negotiations around property division may go more smoothly if individuals consult with a family law attorney. It is also important to keep a close eye on credit reports during this time. As debts are divided, they will not necessarily fall off credit reports on their own. Most creditors have guidelines to be followed after a divorce decree ensuring that the debts are assigned to the right person. With these tips in mind, individuals who are divorced may have more success qualifying for a future mortgage without financial baggage from the divorce jeopardizing the application.
Source: Credit.com, “How to Divide Your House in a Divorce“, Scott Sheldon, July 09, 2014