Avoiding Language Traps in the Divorce Settlement Agreement

Avoiding Language Traps in Divorce Settlement Agreements That Could Affect Your Ability to Obtain Mortgage Financing.

We know it is important to be very mindful of the words used in a divorce settlement agreement in order to avoid any language traps and future conflict. Word choice can have an effect on the divorcing client’s ability to obtain mortgage financing as well. While it may not be top of mind to word the divorce settlement agreement to meet mortgage guidelines, it could significantly help divorcing clients to clarify certain terminology used in the settlement agreement.

The terms “alimony”, “maintenance” and “spousal support” are often used interchangeably to describe payments made by one spouse to another after a divorce. The terms may be identical in meaning but not necessarily in the eyes of an underwriter.

As an example:  From a liability/debt perspective, FHA guidelines differentiate between alimony and maintenance while...

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