The Importance of Mortgage Preapproval in Divorce
Obtaining mortgage preapproval has long been a crucial step for homebuyers, demonstrating to sellers the buyer’s financial capability to secure financing. Similarly, for divorcing spouses, securing preapproval should be a priority, especially when planning to refinance the marital home.
Equity Buyout Preapproval: A Critical Step
For the spouse retaining the marital home, securing an Equity Buyout Preapproval is essential if new mortgage financing is needed. This preapproval is necessary to remove the vacating spouse from the current mortgage or to buy out the equity ownership from the other spouse in cash.
Benefits of Equity Buyout Preapproval:
- Comprehensive Financial Assessment: A Certified Divorce Lending Professional (CDLP®) will account for all income requirements, joint and individual debt, and assets to successfully provide mortgage financing.
- Mitigate Sale Risks: It eliminates the fear of having to sell the home if mortgage financing is unattainable by the in-spouse, as stipulated in the divorce settlement.
- Avoid Litigation: Prevents the need to return to court due to the inability to fulfill the divorce settlement agreement requirements.
- Confidence in Financing: Provides all parties with assurance that mortgage financing will be obtainable once the divorce is finalized, alleviating concerns about execution failure.
Prequalification vs. Preapproval: Understanding the Difference
Prequalification: A basic assessment where a mortgage professional collects preliminary financial information to estimate the borrower’s mortgage affordability.
Preapproval: A more rigorous process where the borrower’s financial information is verified, providing a more accurate loan amount. An Equity Buyout Preapproval is a stronger indicator of the borrowing spouse’s capability, adding credibility to their lending strength.
The Value of a Certified Divorce Lending Professional (CDLP®)
The CDLP® brings significant value to the divorce team during the settlement process by offering a comprehensive understanding of the entire divorce process. Their expertise in family law, tax law, real estate, and mortgage financing sets them apart from other mortgage professionals.
Achieving a Successful Divorce Settlement
A successful divorce settlement involves assembling the puzzle pieces so both spouses emerge whole or on the path to recovery. Each professional on the divorce team should contribute value and perspective to ensure a favorable outcome.
Benefits of Working with a CDLP®
- Expert Guidance: CDLPs® offer informed decisions on home equity solutions and mortgage financing.
- Conflict Resolution: They help identify potential conflicts between the divorce settlement, home equity solutions, and real property issues.
- Holistic Approach: Divorce Mortgage Planning evaluates mortgage options within the overall financial objectives related to divorce, integrating the selected mortgage into long and short-term financial goals to minimize taxes and interest expense while maximizing cash flow.
Early Involvement of a CDLP®
Engaging a Certified Divorce Lending Professional (CDLP®) early in the divorce settlement process can set the stage for successful mortgage financing in the future.
Contact a CDLP® Today
Contact a CDLP® today for a copy of the Divorcing Your Mortgage Homeowner Workbook, a comprehensive guide to credit, real estate, and mortgage financing post-divorce. This workbook will help you organize, prepare, and understand your mortgage financing options, whether refinancing the marital home in an Equity Buy-Out situation or preparing to sell and purchase a new home post-divorce.
Note: This information is for educational purposes only and not intended to provide legal or tax advice. Consult an attorney or tax professional for legal and tax advice. Interest rates and fees are estimates provided for informational purposes only and subject to market changes. This is not a commitment to lend. Rates change daily—call for current quotations. The information in this newsletter has been prepared by or purchased from an independent third party and is distributed for consumer education purposes.
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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