How Divorce Complicates a Mortgage Hi Everyone, So far this week, I’ve spoken with four buyers who are in the middle of a divorce, and each situation has been different. Honestly, I’m still sometimes shocked by what I hear about asset division and financial planning in divorce. As agents, you don’t need to be divorce attorneys, but there are some critical lending realities you should understand, especially when one spouse is planning to buy a home. A few key scenarios come up over and over again: Buying before the divorce is finalized If a spouse who will eventually be paying child or spousal support buys before the divorce is final, that future obligation usually does not have to be counted yet, because legally, it doesn’t exist. In many cases, they are better off buying before the divorce is finalized. On the flip side, a spouse who will be receiving child or spousal support cannot use that income to qualify until: The divorce is finalized, and They have received support for at least three months Timing matters a lot. One spouse keeps the home (and that great 3% rate) This is extremely common. One spouse wants to stay in the departing residence and keep the low interest rate, while the other wants to move on and buy a new home. The spouse who is leaving can typically buy again once the divorce is finalized, but the divorce decree must clearly state: Borrower A is awarded the property Borrower B has no further responsibility for the mortgage Here's where it gets tricky: If Spouse A is unreliable and starts missing payments, those late payments can still show up on Spouse B’s credit, even after they've moved out. That can seriously impact future financing. Because of this, if you’re divorcing a "flaky" spouse, it is completely reasonable, and often smart, to require the mortgage to be paid off or refinanced. You have every right to protect your credit. Buying for the other spouse Sometimes Spouse A wants to help Spouse B buy, but Spouse B can't qualify on their own, even with spousal support. There are options: While still married, they can purchase a property as an investment property An ex-spouse can co-sign for the other spouse Creative structuring can solve problems that look impossible at first glance Separated (but not divorced) buyers who are renting and want to buy This one comes up more often than you'd think. If buyers are separated but not legally divorced, we generally cannot use child or spousal support unless there is a court-ordered separation agreement in place. In addition: The spouse may need to sign a quitclaim deed, or Go on title to the new property, depending on the structure From an underwriting perspective, this can raise questions. It can be hard to justify that two people were living together in a $1.2M home, and now one spouse wants to move out and purchase an owner-occupied home at half the price. Underwriters may ask: Is this a true separation or the first step toward divorce? Is this a legitimate housing need? Or does this start to look like someone trying to purchase an investment property using owner occupied guidelines? In many cases, this comes down to underwriter discretion, documentation, and how clearly the story is presented. Every deal is different, and there is no one-size-fits-all solution. But there are far more options than most people realize. Sadly, we are seeing more divorces, and the best thing we can do is be creative, helpful, honest, and protective of our clients. I will always advocate for them and help them think through the long-term consequences, not just the transaction. If you ever have a divorce-related situation and want to talk it through, let me know. I'm happy to help. Please let me know if you have any questions or if you or any of your clients, friends, or family members need my guidance. I’m just a call, text, or email away. 📞 Direct Line: 661-291-2222 – Text OK 📞 Cell: 661-714-6258 – Text OK 📞 Office: 661-260-2970 ext. 2222 – Text OK 📧 Email: Mike@AugustaFinancial.com But wait, there’s more… Interest Rates Interest rates have been worse for 4 days in a row! Well, maybe that is an exaggeration, but the next statement is true! We have had four days in a row with no improvement in rates, and I hate it! Loan Programs We do loans on Non-warrantable condos! We offer 12-day escrows for pre-approved buyers, including conventional, FHA/Jumbo/Bridge loans. We provide loans in all 50 states, so call me with anything you need. Government loans (FHA/VA/USDA) are in the 5s. Conventional loans up to $832,750 are in the mid to high 5’s. High-balance loans from $832,751 to $1,249,125 are also in the high 5 and 6s. Jumbo loans above $1,249,125 are in the high 5’s and 6’s. ARMS in the 5’s and some in the 6’s Bank statement loans are available again with 10% down, with larger down payments in the 6’s++. Profit and Loss Statement loans require 20% down - no bank statements needed, only a profit and loss statement! 0 down loans are available in the high 6s, with a minimum credit score of 620, up to $1,325,000. Private Money lenders offer Hard Money Loans with 35% down. No-Ratio Loans require a 30% down payment. DSCR (Debt Service Coverage Ratio) loans are available with as little as 15% down. Bridge Loans typically have an interest rate of 7.99% with limited fees, helping you get where you need to go! 3/2/1 Buydowns, 2/1 Buydowns, and 1/0 Buydowns are available at great starting rates! Please note that interest rates are subject to change without notice, and the information above reflects LA County Loan Limits. **Good News for Condos:** Nada today! **Bad News for Condos*** Nothing today! Let's hope all of the damage has been done! CONDO HELP!!! If you have a listing or a buyer interested in a specific condo and are unsure whether it is warrantable or Non-warrantable, please call me, and we can look up Fannie’s list in real-time. We don’t know when something has changed, and it would be impossible to track everything day by day, but we don’t mind looking up a few items each day. The full state of California’s naughty list has been added to: MikeMeena.com! See the link below: https://mikemeena.com/non-warrantable-condos/ Let me know if you hear anything new about condos or townhouses. I am available every day if you need anything. 📞 Direct Line: 661-291-2222 – Text OK 📞 Cell: 661-714-6258 – Text OK 📞 Office: 661-260-2970 ext. 2222 – Text OK 📧 Email: Mike@AugustaFinancial.com Have a great day and an even better tomorrow! Please call me when you have a client who needs to borrow! Mike Meena President | Loan Officer Click to Call or Text: (661) 714-6258 This entry has 0 replies Comments are closed.
