Obtaining mortgage preapproval is a standard practice for homebuyers, demonstrating their financial strength to sellers. For divorcing spouses, this step is essential before refinancing the marital home.
The Importance of Equity Buyout Preapproval: Equity Buyout Preapproval should be a priority for the spouse retaining the marital home if new mortgage financing is required. This process involves refinancing to remove the vacating spouse from the current mortgage or buying out their equity in cash.
- Comprehensive Financial Assessment: An Equity Buyout Preapproval allows the Certified Divorce Lending Professional (CDLP®) to evaluate all income requirements, joint and individual debts, and assets needed for mortgage financing.
- Eliminates Uncertainty: This preapproval can prevent the need to sell the home if the in-spouse cannot obtain mortgage financing, as stipulated in the divorce settlement.
- Avoids Litigation: Ensures compliance with the divorce settlement, reducing the risk of future legal disputes.
- Builds Confidence: Provides assurance that mortgage financing will be available post-divorce, alleviating concerns about execution failures.
Prequalification vs. Preapproval:
- Prequalification: A basic assessment where a mortgage professional estimates the borrower's potential mortgage amount based on initial financial information.
- Preapproval: A more rigorous process that verifies the borrower's financial information, providing a more accurate and credible indication of their borrowing capacity. An Equity Buyout Preapproval is thus a stronger sign of financial readiness.
Role of a CDLP® in Divorce Mortgage Planning: A Certified Divorce Lending Professional (CDLP®) offers significant value during the divorce settlement process by providing a comprehensive understanding of the intersection of family law, tax law, real estate, and mortgage financing. This expertise helps both spouses navigate complex financial landscapes and secure mortgage financing post-divorce.
Steps to Success in Divorce Mortgage Planning:
- Collaborative Approach: CDLP® works with the divorce team to ensure a smooth and successful settlement.
- Holistic Evaluation: Integrates mortgage options with overall financial objectives, minimizing taxes, reducing interest expenses, and maximizing cash flow.
- Early Involvement: Engaging a CDLP® early in the settlement process sets the stage for successful mortgage financing.
Get Your Free Divorce Mortgage Workbook: Contact a CDLP® today for a copy of the "Divorcing Your Mortgage Homeowner Workbook." This comprehensive guide to credit, real estate, and mortgage financing after divorce will help you get organized, prepared, and understand your mortgage financing options, whether you need to refinance the marital home in an Equity Buy-Out situation or plan to sell and purchase a new home post-divorce.
Conclusion: Involving a Certified Divorce Lending Professional (CDLP®) early in the divorce settlement process can ensure a smoother transition and successful mortgage financing. Their expertise helps divorcing homeowners make informed decisions about home equity solutions and navigate potential conflicts between the divorce settlement and real property issues.
Disclaimer: This information is for informational purposes only and not intended as legal or tax advice. Contact an attorney or tax professional for legal and tax 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. The information in this newsletter is prepared by an independent third party and 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.
Copyright 2021—All Rights Divorce Lending Association
