Because equity in a house is often one of the largest assets acquired during a marriage, that equity often becomes the focus of attention by both parties who are trying to favorably divide up their assets. In some cases, there will be little cash available to the parties unless they can find a way to pull out some of the house equity, and that’s not always easy. As the parties and their attorneys and financial advisors research the possibilities, they often run into problems that require specialized help. Here are some common issues that arise.
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 rating is supremely important during and after the process of divorcing. Of course, timely payments on one’s own accounts is obviously important.
2. Qualifying or disqualifying a potential borrower. Many times parties will sit around a 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 2009) require more than just a good credit score or good income or good assets.
3. Informal and 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 specific manner. A Divorce-Mortgage Specialist can recommend the proper method and assure a potential borrower is prepared for 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 unmapped. 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.
The bottom line: start early, be thorough and use good information. I would add that you should also get help from a specialist. It will save you time and money in the long run.
Contributor: Noel Cookman, http://www.themortgageinstitute.com/, a mortgage broker and strong supporter of Collaborative Law.