How Does Divorce Affect Mortgage Borrowing | Must Knows
I am taking the opportunity here to share valuable borrowing information for all mortgage borrowers in a divorce process by guest blogger, George Soutu, mortgage lender. This is a MUST read for all if you are thinking of getting a divorce or in the midst of one. He brings up information which divorce attorneys do not understand and unfortunately put in mortgage settlement decrees that are unenforceable! As I always say, Knowledge is Power, be informed to make better decisions.
There are precautions which need to be taken when going through a divorce. However, one of them should be questioning and double checking the guidance and advice received by professionals guiding you through the divorce process. One of the professionals relied on the most during a divorce is the divorce attorney who is representing you. But I am finding more and more divorce attorneys giving poor advice during the divorce process about how to handle a home which is jointly owned by both divorcing spouses.
The advice received from the attorney during the Divorce Creates Unexpected Problems For Borrowers later on when they want to purchase a home again.
A good example of this is a Borrower I talked to this week. She just finished going through a divorce, and was looking to purchase a home for her and her children. Prior to the Divorce she jointly owned, with her ex-husband, the house she was living in. She also owned a two Family Rental Property.
During the divorce negotiations her Attorney advised her to Quit Claim both properties to her ex-husband, and in return he would accept responsibility for making the monthly mortgage payments on both properties, and the court would give her a “Hold Harmless” agreement. This sounded good to her so she agreed to the conditions. Now the divorce is completed and she wants to purchase a home instead of renting. She has more than enough income to purchase a home in the price range she is looking in.
But, and I am sure you were expecting the but, even though she is no longer making the payments on the other two properties, she is STILL on the mortgages, and even with a “Hold Harmless” the mortgage payments will still be used in her Debt-To-Income (DTI) Ratios by a mortgage lender. This gets further complicated because she Quit Claimed the two properties to her ex-husband, which means she no longer has any ownership in the properties. Not a good position to be in when you are looking to purchase a new property. Yer, she is still on the mortgage for the two properties she quit claimed to her ex-husband, therefore has debt without ownership.
It gets worse for her. Since she does not have ownership in the Two Family Rental Property, she cannot use any of the rental income to offset the mortgage. This put her in a very bad position, because she followed her Attorney’s advice, and did not contact a Lender she trusted during the divorce process.
Anyone who is going through a divorce REALLY needs to talk to a trusted Lender before they agree to anything about there current property owned. Borrowers need to know what the pros and cons are for the decision they are making before they make it. Contacting the Lender afterwards will most likely only end up producing very unpleasant surprises.
This is just one example of how a Divorce Creates Unexpected Problems For Borrowers. A divorce is very stressful and many times those involved are not thinking clearly during that time period. but during the processes they need to talk to those who will play a part in their future plans. If purchasing a new home is in there plans, then a call to a trusted Lender before signing the Divorce Decree is a must. The must knows of mortgage borrowing with a divorce is important information for all. Please share this must read with friends and family who may be impacted by a divorce.
Info about the guest blogger: George Souto NMLS# 65149 is a Mortgage Loan Originator who can assist you with all your FHA, CHFA, and Conventional #mortgage needs in Connecticut. George resides in Middlesex County Connecticut. George can be contacted at (860) 573-1308 or firstname.lastname@example.org. I am pleased to have George be a guest contributor to my web site with his wealth of mortgage knowledge. He is an expert on mortgages and lending practices and is a great resource for all real estate agents.