“I can’t buy a new home if I’m still on the marital mortgage!” is often the statement made by the spouse leaving the marital home. Fortunately, this isn’t necessarily true.
In many divorce situations, the spouse retaining the marital home won’t qualify to refinance the current mortgage and the vacating spouse believes they can’t qualify to purchase a new home while remaining on the mortgage for the marital home.
This thought process seems rational; however, there are certain steps and verbiage to include in the divorce settlement agreement that can remove this obstacle. While many mortgage companies have their own guidelines or ‘overlays’ to investor underwriting guidelines, a Certified Divorce Lending Professional (CDLP™) will know how to handle Court-Ordered Assignment of Debt and the correct verbiage needed in the divorce settlement agreement or separation agreement.
When a borrower has an outstanding debt that was...
While the majority of divorcing consumers have an understanding of credit, unfortunately, there are still those whose spouses ‘took care of all that stuff' and they truly do not have the experience of working with credit and bill paying.
Understanding the makeup of your credit score is the first step towards managing and improving it.
As you might expect, payment history is the most influential component and this is followed closely by the amounts owed. To a lesser degree, the length of time that you’ve utilized credit, the number of new accounts or inquiries that may have and the various types of credit accounts that you hold will also have an impact on your score.
The overall importance of any of these factors can be further influenced by the entirety of the information contained in your consumer credit report. As such, certain patterns, occurrences or items can be measured differently depending on any other factor or combination. There can be...
Alimony is the payment of money by one spouse to the other after separation or divorce. Its purpose is to help the lower-earning spouse cover expenses and maintain the same standard of living after divorce.
Alimony is often considered the more legal term for payments made to an ex-spouse following a divorce. These payments may also be called maintenance payments, spousal support, or support payments.
So, from one perspective, there is no 'real' difference between alimony, maintenance, and spousal support. While from a mortgage lending perspective, this isn't always the case.
For example, John earns a monthly gross salary of $8,000 and pays spousal support each month of $2,000. When obtaining mortgage financing, the monthly obligation of $2,000 is usually considered a liability and has a hard hit on John's monthly income. However, the majority of agencies (Fannie Mae, Freddie Mac, FHA) may allow the $2,000 in monthly support to be reduced from the monthly gross income.
There is a lot of confusion and misunderstanding about equity buy-outs during a divorce. Is it a mortgage or is it a process?
An equity buy-out is a process of acquiring the equity ownership of an existing legal owner of real property. Acquiring the equity ownership in the marital home from an ex-spouse is most commonly done by refinancing the existing mortgage.
When a divorce involves refinancing the marital home, divorcing borrowers typically are looking to pull equity out of the home in order to buy out the other spouse’s equity ownership. Although the divorce settlement agreement may outline the details of the transfer of ownership, it does not determine what type of financing is available for the divorcing borrower.
The name, Equity Buy-Out, confuses some people into thinking they have to purchase the house from the other spouse. This isn’t true, an equity buy-out is actually handled as a refinance loan, not a purchase loan. Now, there are two types...
As a divorce mortgage planner, a CDLP™ is often brought in to work with a client who is going through a divorce. Typically, one of the divorcing spouses would like to retain the marital home while the other may wish to purchase a new home. Here is a list of 5 things you should know about getting a mortgage either during or after the divorce. Divorce mortgage planning is very different than traditional mortgage lending and you will be better served working with a Certified Divorce Lending Professional (CDLP™) who has the required background knowledge of divorce.
#1. Timing of Filing Divorce Petition
The timing of filing a divorce petition with the court has a direct impact on mortgage financing. When a petition for divorce is filed, most mortgage lenders will require a finalized divorce settlement agreement ordered by the court in order to complete and close a new mortgage application and/or loan.
Why? Because many things can change during the course of...
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.
When divorcing couples decide to call it quits one of the first things they think about is ‘what to do with the marital home?’. Should we sell it? Will one of us keep it? What’s it worth?
Obviously, assessing the value of the marital home and other real estate owned in a divorce is a big deal in the settlement process. The question is how to best determine the value.
How do we determine the value of the real property? Should we have an appraisal done or should we ask a real estate professional? It actually depends on what you might do with the property so understanding the difference between an appraisal and a Comparative Market Analysis (CMA) is important.
The two most common methods for assessing the value of real estate are obtaining an appraisal from a licensed appraiser or having a real estate professional provide a CMA— but what’s the difference between the two? To start, both methods are an opinion of value and no two will ever give you the same...
How do you divorce the mortgage - or the house, for that matter? That is a question asked of many Certified Divorce Lending Professionals (CDLP™).
Though a CDLP™ deals with all levels of divorcing homeowners, the more variables involved in a divorce case, the more complicated it can be. Many times a CDLP™ will face divorcing clients, both men and women, who are ill-prepared financially to obtain mortgage financing - even when the final settlement agreement states that one spouse is to refinance the marital property.
Certified Divorce Lending Professionals can help in these situations by spotting red flags through the divorce mortgage planning process and helping divorcing homeowners make a more informed decision regarding their overall mortgage and home equity solutions.
When the case involves both real property and mortgage financing, it also involves much more than the simple disposition of the property. The ability for either spouse to obtain...
The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Equal Credit Opportunity Act (ECOA), which prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance.
The law provides protections when you deal with any organizations or people who regularly extend credit, including banks, small loan, and finance companies, retail and department stores, credit card companies, and credit unions. Everyone who participates in the decision to grant credit or in setting the terms of that credit must comply with ECOA.
When You Apply for Credit, Creditors May Not...
Divorce can be intricate, tricky, and emotionally overwhelming. When you have to relocate, find new housing and decide to rent or purchase a new home, you pile on additional tasks and frustration.
Many divorcing spouses understand the financial benefits of owning a home rather than renting. While obtaining mortgage financing on any given day may oftentimes involve a lot of paperwork and challenges, doing so during a divorce may seem overwhelming and out of reach for many.
For many reasons, divorcing clients may decide to purchase a new home with cash rather than obtaining mortgage financing. New home buyers who are in a position to pay cash for their new home need to make sure it is not only the right decision financially but that you protect your ability to use the mortgage interest deduction on future mortgages.
The mortgage interest deduction is divided into two categories: Acquisition and Home Equity Indebtedness. Acquisition Indebtedness is any mortgage obtained to either...