Obtaining mortgage preapproval to purchase a new home has been common practice for many years. A preapproval shows the home seller that the buyer has the financial strength to obtain mortgage financing to successfully complete the purchase transaction. The mortgage purchase preapproval is one of the first steps required for homebuyers and it should be one of the first steps for a divorcing spouse before agreeing to refinance the marital home.
Equity Buyout Preapproval should also be required by the spouse retaining the marital home if new mortgage financing is required. A refinance due to a divorce is required to remove the vacating spouse from the current mortgage or when the in-spouse needs to buy the equity ownership from the out-spouse in cash form.
- An Equity Buyout Preapproval allows the Certified Divorce Lending Professional (CDLP®) the ability to account for all income requirements, joint and individual debt, and assets needed to successfully provide mortgage financing.
- An Equity Buyout Preapproval can eliminate the fear of selling the home should mortgage financing not be obtainable by the in-spouse if ordered in the divorce settlement agreement.
- An Equity Buyout Preapproval can prevent the need to return to litigation due to the inability to fulfill the requirements of the divorce settlement agreement.
- An Equity Buyout Preapproval will provide all parties with a sense of confidence that there will be no issues obtaining mortgage financing once the divorce is final and alleviate any concerns of failure to execute.
What's the Difference Between a Prequalification and Preapproval?
A prequalification generally means that a mortgage professional collects some basic financing information from the borrower to estimate how much of a mortgage they can afford. A preapproval takes it one step further by verifying the financial information you submit to get a more accurate amount. This means that an Equity Buyout Preapproval is a stronger sign of what the borrowing spouse can afford and adds more credibility to the lending strength of the borrower.
The CDLP® brings tremendous value to the divorce team during the settlement process because of their stronger perspective of the entire divorce process. Their understanding of the intersection of family law, tax law, real estate, and mortgage financing truly separates them from other mortgage professionals in the industry.
A successful divorce settlement is a result of putting the pieces of the puzzle together in such a manner that both divorcing spouses come out of the divorce whole. Each member of the professional divorce team should bring value and perspective that benefits the overall outcome and success.
Working with a Certified Divorce Lending Professional (CDLP®) and incorporating Divorce Mortgage Planning into the divorce settlement may help both spouses obtain new mortgage financing post-divorce.
Contact a CDLP® today for a copy of the Divorcing your Mortgage Homeowner Workbook, a guide to credit, real estate, and mortgage financing after divorce. This workbook will help you get organized, be prepared, and understand your mortgage financing position whether you are needing to refinance the marital home in an Equity Buy-Out situation or prepare to sell and purchase a new home post-divorce.
As a divorce mortgage planner, the CDLP® can help divorcing homeowners make a more informed decision regarding their home equity solutions while helping the professional divorce team identify any potential conflicts between the divorce settlement, home equity solutions as well as real property issues.
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. Working directly with the divorce team, a CDLP® understands the intersection of divorce, tax, real estate, and mortgage financing. The role of the CDLP® is 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.
Involving a Certified Divorce Lending Professional (CDLP®) early in the divorce settlement process can help the divorcing homeowners set the stage for successful mortgage financing in the future.
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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