I’m on disability and getting divorced. How can I keep my house with a low income and credit score?

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The Credible Money Coach suggests options for soon-to-be divorcee on how to get a mortgage to keep her house. (Credible)

Dear Credible Money Coach,

My husband and I are going to be filing for divorce soon. He doesn't want the responsibility of the mortgage payment. My name is on the deed but the mortgage is in his name. I'm on disability and my credit score is so low I don't have one. If we refinance prior to divorce, I could easily pay to keep the house. We live in a rural area, built the house, and have been here 15 years. I'd hate to lose it. Is there anything out there that could help me keep the house? 

—  Raylene 

Hello Raylene. Divorce is stressful and brings significant changes, including financial complications. Understandably, you’re worried about keeping your home amid the upheaval of ending your marriage. 

When it comes to financing or refinancing a home with a low income and credit score, you do have options. Talking to a qualified mortgage expert could help you identify one that's best for you, but meanwhile, I’ll give you basic information to get started.

What happens to a house when spouses divorce

Generally, when two people divorce, the court requires them to split assets owned together during their marriage, including real estate.  

The court and couple may decide that:

  • One person gets to keep the property.
  • One person can keep the property after buying out the other’s share.
  • The house will be sold so the couple can split the proceeds.

From your question, it sounds like you and your husband have decided you’ll keep the house. If you haven’t already, be sure to get that in writing as part of the divorce decree.

Refinancing as part of a divorce

Refinancing the existing mortgage into your name may be the simplest solution if you qualify for a refinanced mortgage on your own. While having low income and a low credit score can make it difficult to qualify for a conventional refinance, the federal government offers options that may help you.

But first, you need to know what type of mortgage you have, such as conventional, FHA, or USDA. Refinancing a conventional mortgage will likely require a credit check and income verification, and you may have difficulty meeting the qualifications. You may have more options with a USDA or FHA loan.

USDA loans

You mentioned that your home is in a rural area. If the current mortgage in your husband’s name is a U.S Department of Agriculture Rural Development loan, you may be able to refinance it in your name with a USDA streamlined assist refinance loan. You’ll need to meet other eligibility requirements, such as making timely payments for the prior 12 months, but won’t need a credit check. Nor will you need to have a home inspection or a certain debt-to-income ratio.

If the current mortgage isn’t a USDA loan, you may be able to qualify for a new USDA loan to "buy out" your husband’s interest in the property. USDA loans have no minimum credit score requirements, but you must demonstrate that you’re willing and able to repay it. 

The USDA has an eligibility tool for determining if you’re qualified.

FHA loans

If your current mortgage is a Federal Housing Administration-backed loan, and you have a good payment history, you may qualify for an FHA refinance. While the interest rate may be higher than a conventional loan, it doesn’t require a credit check, income verification, or a new property appraisal. 

In other words, it may be easier to qualify for an FHA refinance than a conventional loan. But you may have to pay closing costs, and the lender typically requires you to buy mortgage insurance. 

If your current mortgage isn’t an FHA loan, qualifying for a new FHA loan on your own could be another option.

A final word

Even when it’s amicable, divorce is complicated and emotional. My best advice is to take these ideas and speak with a qualified mortgage expert and divorce attorney. They’ll have more information about your circumstances and will help you make the best decision based on your finances and future plans. 

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About the author: Laura Adams is a personal finance and small business expert, award-winning author, and host of Money Girl, a top-rated weekly audio podcast and blog. She’s frequently quoted in the national media, and millions of readers and listeners benefit from her practical financial advice. Laura’s mission is to empower consumers to live richer lives through her speaking, spokesperson, and advocacy work. She received an MBA from the University of Florida and lives in Vero Beach, Florida. Follow her on LauraDAdams.com, Instagram, Facebook, Twitter, and LinkedIn.