Mike’s Mid Day Mortgage update

Today, I’m sharing a story from a conversation with past clients navigating a divorce gracefully and practically. The wife wants to stay in their current home with the kids, while the husband is moving out. This couple stands out because of their amicable approach - handling the split honestly and prioritizing their children’s stability. Let’s dive into how we’re helping them manage their mortgage and finances with a key lesson on divorce-related support payments and mortgage qualification.

The Situation: Keeping the Family Home

We secured this couple a fantastic 30-year fixed-rate mortgage at 2.875% a few years ago. The wife recently called, eager to keep that low rate by transferring the mortgage into her name. She said she tried to get the bank to transfer into her name, but they wanted her debt-to-income ratio below 30%, which did not happen. I explained that while it’s worth attempting to negotiate with the bank, transferring a mortgage rate tied to both spouses is challenging. However, since they’re on good terms, they can keep the mortgage in both names, with the divorce decree specifying that the husband is exempt from payments. This setup protects his ability to buy a new home as the wife handles the payments. He’s even willing to let his equity sit in the house for a year until he’s ready to buy, and his mother-in-law plans to sell stocks to provide cash when he is prepared to buy. Their focus? Keeping the kids in a familiar environment.

The husband trusts the wife as a solid risk, understanding that missed payments could impact his credit, even though he can still secure a mortgage. He prioritizes the kids’ stability over financial risk, showcasing their remarkable teamwork.

Planning for the Husband’s Next Move

We also discussed pre-approving the husband for a mortgage next year after he rents for 12 months. During this chat, he mentioned paying $2,200 monthly in child support. I suggested shifting this to spousal support in the divorce paperwork, which could boost his qualifications. Here’s why: spousal support is deductible from his income for mortgage purposes, unlike child support, which is not. If he earns $16,200 monthly, deducting $2,200 as spousal support lowers his taxable income to $14,000. As a debt, child support at $2,200 is 14% of his income, limiting his buying power. With spousal support, this debt-to-income ratio improves, expanding his options.

He hesitated, noting that spousal support might be taxable for the wife, unlike child support. I clarified the current tax rules (effective post-2018 under the Tax Cuts and Jobs Act): spousal support from agreements after December 31, 2018, is neither taxable for the recipient nor deductible for the payer - matching child support’s non-taxable status. For pre-2019 agreements, it’s taxable for the recipient and deductible for the payer, but this couple’s divorce is recent, so the new rule applies. This eliminates the wife’s tax concern, making spousal support a viable strategy.

The Numbers: Qualification Impact

Let’s break it down. With $300,000 down:

• Child Support Scenario ($2,200/month): The $2,200 is treated as a debt, capping his debt-to-income ratio at around 50%. This limits him to a loan of approximately $675,000 or a total purchase price of $975,000.
• Spousal Support Scenario ($2,200/month): Deducting $2,200 from his $16,200 income reduces his qualifying income to $14,000. This adjusts his debt-to-income ratio favorably, allowing a loan up to $800,000 or a total purchase price of $1,100,000.

That’s a $125,000 increase in buying power - enough to secure a $1.1 million home versus $975,000!

Imagine if the wife made considerably less than him, and he had to pay $3500 a month!

Showing as spousal support = $1,120,000 price with $300K down.

Showing as child support gets him $839,000 with $300K down!

Key Takeaways

This couple’s story highlights the importance of strategic divorce planning. Keeping the original mortgage, leveraging spousal support, and timing the husband’s next purchase can maximize their financial outcomes. Understanding these nuances is critical for professionals like me - especially in divorce cases - to unlock better loan options for clients. If you have clients going through a divorce, then I am only a phone call away, and I promise I will make you look incredible!

Please let me know if you have any questions or if a client needs my guidance. I’m just a call, text, or email away.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 Email: Mike@AugustaFinancial.com

But wait, there’s more…

Interest Rates

8-3-1 What does that mean? We had 8 winning days followed by 3 losing days, and now one winning day in a row where rates got better! YAY! Here’s to 12 more good days in a row!!!

• We do loans on Non-warrantable condos!
• We offer 12-day escrows for pre-approved buyers - 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 high 5’s and low 6’s.
• Conventional loans up to $806,500 are in the low to mid 6s.
• High Balance Loans from $806,501 to $1,209,750 are also in the 6’s.
• Jumbo loans above $1,209,750 are in the 6’s and 7’s.
• Bank statement loans are available with 10% down again, 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 $1,300,000.
• Private Money lenders offer Hard Money Loans with 35% down.
• No Ratio Loans require 30% down.
• 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:** – Nothing new!

**Bad News for Condos***

Nothing this week!  

The full state of California 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.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 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!