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...
Whether the divorcing couple is on good terms or bad terms getting divorced can be rough. It can be stressful, time-consuming, and confusing with all of the paperwork that goes into it. Chances are both parties are listed as shared parties on a lot of documents, including insurance policies.
How is the disposition of the marital home affected?
The person who stays in the marital home after the divorce will need to make sure that the homeowners' insurance is under his or her name. Likewise, the person moving out must make arrangements to purchase new homeowners or renters policy for the new residence. Previous insurance claims on the marital home may also cause problems and the property may be deemed uninsurable to new buyers.
Experts suggest that filing 2 claims within 3 years will subject an individual consumer or home to a significant risk of being rejected by insurance carriers.
What is a CLUE Report?
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 lesser degrees, 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...
The marital home: typically one of, if not the biggest marital asset. The two most common ways to deal with the marital home is for one party to retain the home and pay the other party their share of the equity by refinancing the current mortgage. The other way is the home is sold and the parties split the net proceeds.
The name, Equity Buy-Out, confuses some people into thinking they have to purchase the house from the other spouse. An Equity Buy-Out is actually handled as a refinance loan, not a purchase loan. There are two types of refinances that need to considered. Just because the court orders one party to buy the equity out of the other party, that doesn’t dictate the type of refinancing category it will fall under and each one has its own limitation and requirements to be met.
The two types of refinances are either a Rate/Term refinance or a cash-out refinance. Rate/Term refinances typically have better terms with regards to lower interest rates and access to...
A professional divorce team has a range of team players including the attorney, financial planner, accountant, appraiser, mediator and yes, a divorce lending professional. Every team member has a significant role ensuring the divorcing client is set to succeed post decree.
Diverse skills allow the divorce team to think about a specific problem in a different, and often more strategic, way. By being able to look at a problem from different angels and draw on a wealth of experience and knowledge from all team members, allows for innovative and creative solutions.
1 – Diverse Teams Fill In The Knowledge Gap | The reality is that no one knows everything. Teams solve problems faster when they’re more cognitively diverse.
2 – Diverse Teams Fill In the Perspective Gap | Perspective is the capacity to view or think about a situation or problem in a wise and reasonable way.
3 – Diverse Teams Fill In the Experience Gap | Experience mostly comes through time, but...
So, what now? You were awarded the marital home in the divorce but you’re not currently on the mortgage. How do you work with the Mortgage Holder going forward?
Assumption & Release of Liability | When a former spouse assumes ownership of the home and the mortgage, this does not always mean the mortgage lender will release the original borrower from their financial obligation or liability on the mortgage. A loan assumption is a transaction in which a person (the “assumptor”) obtains an ownership interest in real property from another person and accepts responsibility for the terms, payments ,and obligations of that other person’s mortgage loan. The assumptor is liable for the outstanding obligations and unless a release of liability is requested, the original borrower will remain liable as well.
Successor Homeowner’s Right to Information | Another sticking point for divorcing spouses who are awarded ownership of the marital home and who...