GETTING DIVORCED?
Top 10 Things You Should Know About Your Mortgage When Going Through A Divorce
  • Timing of Filing Divorce Petition:

    • I will need a temporary settlement agreement or finalized divorce settlement agreement ordered by the court in order to complete and close your loan​​​

  • Use/Ownership Rule:

    • To meet the Ownership Rule -- You both must remain on title​

    • To meet the Use Rule -- the marital home must have been your primary residence during the marriage. 

  • Title Vesting:

    • ​Tenancy by the Entirety​​

    • Joint Tenancy with Survivorship

    • Tenancy in Common

    • if you are retaining the marital home and leaving the current mortgage financing in place, please be sure to discuss current title vesting with your attorney as a divorce judgment can have a default effect on title

  • Contingent Liability:

    • if the court orders one party responsible for the payment the debt is now considered a "Contingent Liability" for the other party​

    • but, neither party is released from the overall obligation to the creditor

  • Qualified Income and 6/36 Rule:

    • in order to use maintenance and/or child support as income for mortgage financing purposes, each source must meet the 6/36 Rule​:

      • you must provide documentation showing receipt for this income for the previous 6 consecutive months​

      • at the time of application, there must remain 36 months of future payments due to you

  • Equity BuyOut:

    • A couple of guidelines to take into consideration​

      • the Divorce Settlement Agreement should state the dollar amount and/or percentage of equity the departing spouse is to receive.​

      • the benefit is that you will receive a lower interest rate and avoid a "Cash Out" refinance

      • the entire amount of equity taken out of the home must go directly to the departing spouse at closing. 

      • No cash in any amount can go directly to you or it will not be considered an Equity Buy Out

  • 90-Day Cash Rule:

    • if you are considering purchasing a new home with cash to avoid any potential mortgage financing during the divorce process and plan to take a mortgage out in the future, you need to understand the 90-Day Cash Rule

    • from a mortgage perspective, you have 90 days to apply for a new mortgage and avoid the new mortgage being considered a "cash out" mortgage​

  • Maintaining Credit During Divorce:

    • Communication between both spouses can help avoid any miscommunication as to who is paying what bill​

    • Ask each creditor that extended you credit to transfer the debt to the name of the person who will be responsible

    • Keep joint bills current

    • Ask the credit grantor to remove a spouse who is only an authorized user or close the joint account to avoid additional charges

    • Close as many joint accounts as possible

  • Appraised Value / Appraisal:

    • Several Valuation methods can be used​

      • Tax Assessed Value​ 

        • not an accurate method -- usually low by 10 - 20 percent​

        • given little weight in court

      • Real Estate Agent:

        • valuations are less reliable than an actual appraisal​

      • Professional Appraisal:

        • ​be sure to request a Divorce Appraisal on a General Purpose Appraisal Report​​​​

  • Documentation Needed:

    • Executed copy of the final Divorce Settlement Agreement​

    • Proof of age for children for whom child support is paid

    • Proof of receipt of maintenance/support

    • Promissory Note Income

Divorce Mortgage Planning Defined