I work mainly in Texas where its equity lending laws are very restrictive. It makes what I do very critical. Although, the issues at this intersection affect all divorcing Americans, and even more so since the "mortgage meltdown" of 2007-2009. Suffice it to say for now, if we can create solutions in Texas, we can create them in any state.
I will try to simply give advice and guidance about the issues that affect divorcing folks who must obtain mortgage financing. I will answer questions and, as I do any way, conduct necessary research to supply accurate information for the reader.
A divorce attorney recently asked me what mistakes I most frequently saw where I work - at the intersection of divorce and mortgage-finance. Thus, the full title of this blog is TOP 5 MISTAKES PEOPLE MAKE AT THE INTERSECTION OF DIVORCE AND MORTGAGES.
It goes without saying the first and major mistake is not talking to me early enough. I know that this appears presumptious and a bit pompous. But, I'm serious. Most problems can be fixed . . . if you have enough time and if you take action with reliable information.
Here are the top 5.
1. Not monitoring joint accounts and assuring payments are current. Often times someone may forget that a credit card is actually a joint account because one party or the other has been used to using that card exclusively. Knowing exactly what accounts report on your credit report is supremely important during and after the process of divorcing. Of course, timely payments on one’s own accounts is obviously important. One late payment can ruin or delay chances at mortgage financing and, as we have seen lately, can initiate an appalling downward spiral of credit scores.2. Qualifying or disqualifying a potential borrower. Many times parties will sit around a divorce negotiating table and rely on inaccurate information to say “Oh, any bank would be happy to have that loan” or, the opposite “There’s no way in the world he/she can get financing.” No one except a competent *Divorce-Mortgage Specialist can make that determination. Additionally, guidelines that applied a mere few weeks ago may not still apply. Just because a borrower got a loan before does not guarantee they will get one presently or in the future. New rules (especially ones enacted in 2008-2009) require more than just a good credit score or good income or good assets. Most often, parties disqualify someone by assuming that they cannot "afford it." Many times, we have innovated a solution that leaves the borrower in a better budget situation (with lower monthly expenses) even after financing a buyout to their ex-spouse. One must get the specialist involved as soon as possible so that all parties are working with reliable information.
3. Informal or good faith agreements that are documented poorly or not at all. Child and spousal support is often contemplated but constructed informally. For example, during the process of divorcing instead of paying support, a spouse may often agree to make payments on certain accounts that will ultimately be assigned to his/her spouse. Such “income,” if needed to qualify for a mortgage loan, must be structured and documented in a very precise manner. A *Divorce-Mortgage Specialist can recommend the proper method and assure a potential borrower is prepared for mortgage qualifying. For the most part, no additional payments need to be made - it's a simple of matter of how they are made that makes the difference in mortgage qualifying.
4. Waiting too late to apply and qualify. It may be tempting to procrastinate or even assume that there will be no problems given previous mortgage qualifying. There is nothing to be gained and much to be lost by waiting. As soon as someone contemplates divorce, it is important to spend a few minutes consulting with a *Divorce-Mortgage Specialist. Nearly all problems can be resolved in time. But, once terms of a divorce are set it is costly and most times impossible to change them. In our experience, no client has benefited by waiting to apply for mortgage evaluation and approval.
5. Relying on well-intentioned friends or acquaintances for mortgage advice. Even former mortgage professionals should know that guidelines change frequently and advice given a year ago is not reliable today. Since the “mortgage meltdown” of 2007-2009 and the ensuing barrage of regulatory belt-tightening, the landscape of mortgage qualifying may be somewhat recognizable but it is also surely in flux. The only rules that matter to the borrower are the rules that the people with the money have. If we want to borrower their money, we generally have to play by their rules; the “way things used to be” notwithstanding.
Well, there they are. Of course, there are others. But the benefit is that you have found this blog and there is really no reason why you should be blind-sided at the intersection of divorce and mortgage-finance. You need not even have a close-call let alone an accident.
Noel Cookman can be reached at 972-724-2881 or Noel@TheMortgageInstitute.com.
*Divorce-Mortgage Specialist: No accreditation currently exists for such a designation. We anticipate that within several months, we will be able to offer training, consultation and accreditation for this specialty.
