“I can’t buy a new home if I’m still on the marital mortgage!” is often the statement made by the spouse leaving the marital home. Fortunately, this isn’t necessarily true.
In many divorce situations, the spouse retaining the marital home won’t qualify to refinance the current mortgage and the vacating spouse believes they can’t qualify to purchase a new home while remaining on the mortgage for the marital home.
This thought process seems rational; however, there are certain steps and verbiage to include in the divorce settlement agreement that can remove this obstacle. While many mortgage companies have their own guidelines or ‘overlays’ to investor underwriting guidelines, a Certified Divorce Lending Professional (CDLP™) will know how to handle Court-Ordered Assignment of Debt and the correct verbiage needed in the divorce settlement agreement or separation agreement.
When a borrower has an outstanding debt that was...
"Nothing matters more in winning than getting the right people on the field. All the clever strategies and advanced technologies in the world are nowhere near as effective without great people to put them to work." Jack Welch, Winning
Many times in a divorce, we are more focused on curing the problem at hand, i.e., distributing real property and assets, that we forget there is life after divorce. The biggest challenge is the lack of knowledge, understanding, and preparedness of how the various pieces of the divorce puzzle fit together and indeed overlap.
One of the primary keys to a successful divorce is understanding the various puzzle pieces of a divorce involving real property as well as assembling your professional divorce team. The intersection of family law, financial and tax planning, real property, and mortgage planning is real.
It takes teamwork to bring the typical divorce settlement together. There are usually quite a few people involved from divorcing clients,...
While the majority of divorcing consumers have an understanding of credit, unfortunately, there are still those whose spouses ‘took care of all that stuff' and they truly do not have the experience of working with credit and bill paying.
Understanding the makeup of your credit score is the first step towards managing and improving it.
As you might expect, payment history is the most influential component and this is followed closely by the amounts owed. To a lesser degree, the length of time that you’ve utilized credit, the number of new accounts or inquiries that may have and the various types of credit accounts that you hold will also have an impact on your score.
The overall importance of any of these factors can be further influenced by the entirety of the information contained in your consumer credit report. As such, certain patterns, occurrences or items can be measured differently depending on any other factor or combination. There can be...
Alimony is the payment of money by one spouse to the other after separation or divorce. Its purpose is to help the lower-earning spouse cover expenses and maintain the same standard of living after divorce.
Alimony is often considered the more legal term for payments made to an ex-spouse following a divorce. These payments may also be called maintenance payments, spousal support, or support payments.
So, from one perspective, there is no 'real' difference between alimony, maintenance, and spousal support. While from a mortgage lending perspective, this isn't always the case.
For example, John earns a monthly gross salary of $8,000 and pays spousal support each month of $2,000. When obtaining mortgage financing, the monthly obligation of $2,000 is usually considered a liability and has a hard hit on John's monthly income. However, the majority of agencies (Fannie Mae, Freddie Mac, FHA) may allow the $2,000 in monthly support to be reduced from the monthly gross income.
What is Divorce Mortgage Planning? Divorce Mortgage Planning is a holistic approach to the process of evaluating mortgage options in the context of the overall financial objectives as they relate to divorcing situations.
The CDLP™ (Certified Divorce Lending Professional) works directly with the professional divorce team such as the attorney, financial adviser, mediator, etc., to help integrate the mortgage selected into the overall long and short-term financial and investment goals, to help minimize taxes, to minimize interest expense, and maximize cash flow.
When mortgage financing is needed as part of the divorce settlement, working with a Certified Divorce Lending Professional, can make the process smoother and provide more successful outcomes for the divorcing homeowners. Understanding the various phases of divorce mortgage planning is key.
There are 4 phases to the CDLPs model for divorce mortgage planning.
There is a lot of confusion and misunderstanding about equity buy-outs during a divorce. Is it a mortgage or is it a process?
An equity buy-out is a process of acquiring the equity ownership of an existing legal owner of real property. Acquiring the equity ownership in the marital home from an ex-spouse is most commonly done by refinancing the existing mortgage.
When a divorce involves refinancing the marital home, divorcing borrowers typically are looking to pull equity out of the home in order to buy out the other spouse’s equity ownership. Although the divorce settlement agreement may outline the details of the transfer of ownership, it does not determine what type of financing is available for the divorcing borrower.
The name, Equity Buy-Out, confuses some people into thinking they have to purchase the house from the other spouse. This isn’t true, an equity buy-out is actually handled as a refinance loan, not a purchase loan. Now, there are two types...
One of the biggest decisions divorcing homeowners face is what to do with the marital home and real property. Trying to agree on how to handle the mortgage and the home can be a challenge without proper direction from a Certified Divorce Lending Professional (CDLP™).
The options available depend on a number of factors, such as how the property was financed and how ownership is currently held. Additional factors to take into consideration include the disposition of property, the amount of equity available in the property, and the income sources available for the borrowing spouse.
There are many common mistakes made during divorce when working with a mortgage professional who does not fully understand the implications of divorce and the opportunities to help the divorcing homeowners with their mortgage financing. Two of the more common mistakes made are as follows:
Mistake #1 - "If the couple has equity in the home, the spouse keeping the house should apply...
As a divorce mortgage planner, a CDLP™ is often brought in to work with a client who is going through a divorce. Typically, one of the divorcing spouses would like to retain the marital home while the other may wish to purchase a new home. Here is a list of 5 things you should know about getting a mortgage either during or after the divorce. Divorce mortgage planning is very different than traditional mortgage lending and you will be better served working with a Certified Divorce Lending Professional (CDLP™) who has the required background knowledge of divorce.
#1. Timing of Filing Divorce Petition
The timing of filing a divorce petition with the court has a direct impact on mortgage financing. When a petition for divorce is filed, most mortgage lenders will require a finalized divorce settlement agreement ordered by the court in order to complete and close a new mortgage application and/or loan.
Why? Because many things can change during the course of...
Divorce and mortgage financing concerns are often a touchy subject in divorce situations. Particularly when one spouse is dependent upon income awarded from the divorce for mortgage qualifying purposes and also when contingent liabilities are present, such as a jointly held mortgage on the marital home.
Having a basic understanding of how lenders look at the different sources of income awarded in a divorce settlement as well as how joint and contingent liabilities are handled can help you better serve your divorcing clients who are concerned with the ability to obtain mortgage financing post-decree.
Avoiding hurdles with mortgage financing in a divorce situation is easier when you have a better understanding of the potential challenges your divorcing clients may face when obtaining mortgage financing.
Income vs. Qualifying Income
Often times in a divorce and mortgage situation there are various types of income to consider: Employment Income; Alimony/Maintenance Income; Child Support...
Can I Buy a House While Going Through a Divorce?
You have to live somewhere after the divorce, right? And most homeowners would prefer not to go backward by becoming renters again. While many divorcing couples may not be in a financial position to consider buying a new home during the divorce, those fortunate enough to have good credit and what appears to be adequate income to buy a new house before the divorce is final may still find the road to homeownership a little bumpy.
Here are three areas of concern to address when buying a home during the divorce process:
Who owns the property?
In most states, all property purchased by either spouse during the marriage (i.e. until the final divorce decree is entered) is considered to be “marital property”. Marital property is subject to “equitable division” in most divorce cases. If the wife purchases a new home to live in while a divorce action is pending, the title to the new home might be in her name only. But the...