Obtaining mortgage preapproval to purchase a new home has been a standard practice for many years. It demonstrates to the home seller that the buyer has the financial strength to secure mortgage financing and complete the purchase. This preapproval process is not only vital for traditional homebuyers but should also be a priority for divorcing spouses before refinancing the marital home.
Importance of Equity Buyout Preapproval for Divorcing Spouses
Equity Buyout Preapproval is essential for the spouse retaining the marital home if new mortgage financing is required. This type of refinance is necessary to remove the vacating spouse from the current mortgage or to buy out the equity ownership from the other spouse.
- Accounting for All Financial Requirements: An Equity Buyout Preapproval allows the Certified Divorce Lending Professional (CDLP®) to consider all income requirements, joint and individual debt, and assets necessary to provide mortgage financing successfully.
- Eliminating Home Sale Fears: It can remove the fear of needing to sell the home if the in-spouse cannot secure mortgage financing as stipulated in the divorce settlement.
- Avoiding Litigation: It can prevent the need to return to litigation due to an inability to meet the divorce settlement agreement requirements.
- Providing Confidence: It gives all parties confidence that mortgage financing will be obtainable once the divorce is final, alleviating concerns about failure to execute the agreement.
Prequalification vs. Preapproval: Understanding the Difference
- Prequalification: This involves a mortgage professional collecting basic financial information from the borrower to estimate the mortgage amount they can afford.
- Preapproval: This takes it a step further by verifying the financial information provided to determine a more accurate amount. Thus, an Equity Buyout Preapproval offers a stronger indication of what the borrowing spouse can afford and enhances their credibility.
The Value of a Certified Divorce Lending Professional (CDLP®)
A CDLP® brings significant value to the divorce team during the settlement process by offering a comprehensive perspective on the entire divorce process. Their expertise in family law, tax law, real estate, and mortgage financing distinguishes them from other mortgage professionals.
Benefits of Working with a CDLP®
- Holistic Approach: Divorce Mortgage Planning is a holistic process that evaluates mortgage options within the overall financial objectives related to divorce.
- Conflict Identification: A CDLP® helps identify potential conflicts between the divorce settlement, financial planning, and home equity solutions.
- Integration of Goals: The role of the CDLP® is to integrate the chosen mortgage into the overall long and short-term financial and investment goals, helping to minimize taxes, reduce interest expenses, and maximize cash flow.
Successful Divorce Settlements
A successful divorce settlement is achieved by piecing together all elements so that both spouses emerge whole. Each member of the divorce team should contribute value and perspective that benefits the overall outcome.
Contact a CDLP® Today
Working with a Certified Divorce Lending Professional (CDLP®) and incorporating Divorce Mortgage Planning into the divorce settlement can help both spouses secure new mortgage financing post-divorce.
- Resource Guide: Contact a CDLP® today for a copy of the Divorcing your Mortgage Homeowner Workbook. This guide helps you organize, prepare, and understand your mortgage financing position, whether refinancing the marital home in an Equity Buyout or planning to sell and purchase a new home post-divorce.
Final Thoughts
Involving a Certified Divorce Lending Professional (CDLP®) early in the divorce settlement process can set the stage for successful mortgage financing in the future.
Disclaimer: This information is for educational purposes only and not intended to provide legal or tax advice. Please consult an attorney or tax professional for advice. Interest rates and fees are estimates and subject to market changes. This is not a commitment to lend. Rates change daily – call for current quotations.
This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Interest rates and fees are estimates provided for informational purposes only and are subject to market changes. This is not a commitment to lend. Rates change daily – call for current quotations. The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.
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