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The intersection of deed, decree, and debt during divorce can be complex, and addressing these elements separately in the settlement process is crucial. This is why working with a Certified Divorce Lending Professional (CDLP®) is essential.
Understanding the Deed
When transferring ownership of the marital home, it’s vital to use the correct transfer deed to protect the new sole owner. The two common types of deeds are Quit Claim and Warranty deeds:
- Quit Claim Deed: This deed is often used but provides the least protection. It offers no warranties, leaving the grantee with little recourse if title issues arise.
- Warranty Deed: This deed provides the most protection, guaranteeing that the grantor holds clear title to the property. This guarantee extends back to the property's earliest title, offering comprehensive protection against future claims.
Navigating the Decree
The divorce decree and settlement agreements are critical in determining the ability to obtain mortgage financing post-divorce. Proper verbiage within these agreements is essential:
- Specific Time Frames: Clearly state the timeframe for refinancing the home.
- Responsibility for Payments: Detail who is responsible for the existing mortgage, taxes, and insurance until refinancing is complete. Incorrect wording can create hurdles for future mortgage financing.
Pre-approval for future mortgage financing should be obtained before finalizing the divorce to avoid potential issues.
Managing the Debt
Addressing marital debt in the divorce settlement agreement is another critical aspect:
- Specificity in Debt Payment: Clearly specify how joint debt will be paid and by whom. Vague statements like “parties will share the burden of paying joint debt 50/50” are insufficient.
- Detailed Payment Responsibilities: Specify that each party is responsible for paying 50% of specific debts and outline how each party will make these payments. For example, state that each spouse will pay 50% of the monthly payment until the debt is fully paid.
Working with a Certified Divorce Lending Professional (CDLP®)
An experienced mortgage professional specializing in divorce is invaluable. A CDLP® can provide expert guidance, answer questions, and ensure that all aspects of the divorce settlement support future mortgage financing.
Conclusion
Navigating the complexities of deed, decree, and debt during a divorce requires specialized knowledge and careful planning. Working with a Certified Divorce Lending Professional (CDLP®) can help divorcing homeowners make informed decisions and achieve successful mortgage financing outcomes.
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