Splitting the House: Navigating the Complexities of your MN Divorce and Real EstateMay 26, 2023
Your MN divorce comes with so many decisions that have to be made. One of the biggest is what to do with the family home. Often, one spouse wants to keep it. Other times, both are looking to purchase new homes, but what are your options? This week on the podcast, we had Brett Leschinsky join us to discuss the importance of working with a mortgage or loan officer specializing in divorce.
What do mortgage professionals need to see in your divorce decree?
For the person exiting the home and going to purchase a new home, the divorce decree needs to state that the house is being awarded to one spouse, and the other spouse is indemnified and held harmless from that mortgage payment. The divorce decree will trump any credit report, so this is very important to have in the decree. Some mortgage officers or banks will say that the ex-spouse's name must be off the credit score to qualify for a new loan, but that is not the case. This scenario is where it’s critical to work with someone specializing in divorce.
Can someone qualify for a home loan using child support or maintenance/spousal support?
Child support and maintenance support can be used to qualify for a new home loan or to refinance the family home; however, typically, banks like to see six months of consistent income before someone qualifies for a loan. In addition, most lenders like to see the divorce finalized so they know things won’t go awry during the process. There are ways around this, though. The first one is to have separate bank accounts from when you begin the divorce.
Make sure to bring in a divorce loan specialist in early so they can help set you up for success early in the process. That way, you can refinance or purchase right when the divorce decree is finalized using the child support/maintenance support income. Setting up temporary financial support gets the clock ticking right away, and you don’t have to wait until the end of the divorce for the six-month clock to start moving.
Another important aspect is looking at how long the financial support will be coming in. There needs to be more than three years of support in the divorce decree to qualify for a home loan or refinance using the financial support as income. Extending the years of support may be necessary while reducing the monthly amount received.
How can someone keep their current interest rate while refinancing?
To keep the interest rate for the person refinancing, you’ll need to go to your current loan servicer and ask for a qualifying name delete assumption. If you do not ask for this specific delete assumption, you will likely be told by a teller or loan officer that they do not allow you to keep the current interest rate (because they aren’t educated in the divorce-specific area). Some banks still do not allow a qualifying name delete assumption, but most are allowing this service now.
My conversation with Brett highlighted the importance of working with a mortgage officer specializing in divorce. Working with individuals who specialize in specific areas is essential so that you know everything will be covered. If you want a knowledgeable person in your corner, contact me! I’d be honored to help you navigate your mediation.
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