The buyout refinance
When one spouse keeps the marital home, the standard move is a cash-out refinance in the keeping spouse’s name alone. The new loan pays off the old joint mortgage and funds the buyout amount owed to the departing spouse. Most lenders treat this as a rate-and-term refinance for pricing if the divorce decree requires the buyout, which means better rates than a typical cash-out.
Timing matters. Lenders want to see the divorce decree recorded and the property transferred by quitclaim deed before or at closing. If the decree is not final, some lenders will still proceed with a signed separation agreement plus 6 to 12 months of proof that the keeping spouse has been making the payment solo.
Qualifying on one income
Going from two incomes to one is the hardest part. Lenders qualify you on your individual income only, plus any court-ordered support you receive. Child support and alimony count as income only if you can document receipt for 6 months and show at least 3 years remaining on the court order.
If your income alone falls short, non-QM programs can help. Bank statement loans count deposits instead of tax-return income, and asset depletion programs qualify you on savings and investments rather than monthly earnings. These are common paths when the divorce disrupted your employment or your tax returns no longer reflect your real cash flow.
Buying while the divorce is pending
You can buy a new home before the divorce is final, but expect extra paperwork. Lenders will ask for the filed divorce petition, any temporary support orders, and proof that your housing payment on the marital home is covered (by you, your ex, or the support order). The marital home payment counts in your debt-to-income ratio unless the decree assigns it to your ex and you can show 12 months of them paying it on time from their own account.
In community-property states, your spouse may need to sign the deed of trust even if they are not on the loan. Your loan officer should flag this early so it does not surprise you at the closing table.
Protecting your credit through the split
Until the joint mortgage is refinanced or the home is sold, both names stay liable. A single missed payment by your ex hits your credit too. If you are keeping the home, refinance as soon as the decree allows. If you are selling, keep making the payment until closing and document everything. Lenders reviewing your new application will scrutinize every late payment on the joint tradeline, so 12 clean months after the split carry real weight.
Programs that fit this situation
Cash-Out Refinance
A cash-out refinance replaces your current mortgage with a larger one and pays you the difference in cash, commonly up to 80% of your home’s value on a primary residence.
Rate-and-Term Refinance
A rate-and-term refinance replaces your mortgage with a new one to change the rate, the term or the loan type, without taking cash out.
Bank Statement Loans
A bank statement loan is a non-QM mortgage that calculates self-employed income from 12 or 24 months of personal or business bank deposits instead of tax returns.
Asset Depletion Loans
An asset depletion (asset utilization) loan converts your liquid assets into a monthly qualifying income, typically by dividing eligible assets by a set number of months, so retirees and investors with savings but little paycheck can qualify..
Conventional Loans
A conventional loan is a mortgage not insured by the government that follows Fannie Mae or Freddie Mac guidelines.
FAQ
Can I get a mortgage while my divorce is still pending?
Yes, but it requires more documentation. Lenders will want the filed divorce petition, any temporary support orders, and proof of who is paying the current housing payment. Final decrees make everything simpler, but a pending divorce is not an automatic denial.
Does my ex need to sign if I buy a home before the divorce is final?
In community-property states, usually yes, at least on the deed of trust, even if they are not on the loan. In common-law states, typically no. Your loan officer and title company will confirm based on your state.
How does a buyout refinance work?
You refinance the marital home into your name alone. The new loan pays off the old joint mortgage and funds the buyout amount the divorce decree awards to your ex. When the decree requires the buyout, most lenders price it as a rate-and-term refinance rather than cash-out.
Can child support count as income for a mortgage?
Yes, if you can document receipt for at least 6 months and the court order shows at least 3 years of payments remaining. Lenders will ask for the decree, 6 months of bank statements or cancelled checks, and sometimes a payment history from the state disbursement unit.
What if my ex stops paying the joint mortgage?
You are still liable until the loan is refinanced or paid off, and missed payments damage your credit too. If you are applying for a new mortgage, lenders will count the joint payment in your debts unless the decree assigns it to your ex and you can show 12 months of on-time payments from their own account.
Which loan works best when my income dropped after divorce?
If your tax returns no longer reflect your real income, bank statement loans qualify you on deposits instead. If you have strong savings but low current income, asset depletion programs divide your assets into a qualifying monthly income. Conventional loans work when your single income and credit are solid on their own.