“I can’t buy a new home if I’m still on the marital mortgage!” is often the statement made by the spouse leaving the marital home. Fortunately, this isn’t necessarily true.
In many divorce situations, the spouse retaining the marital home won’t qualify to refinance the current mortgage and the vacating spouse believes they can’t qualify to purchase a new home while remaining on the mortgage for the marital home.
This thought process seems rational; however, there are certain steps and verbiage to include in the divorce settlement agreement that can remove this obstacle.
How to Handle Court-Ordered Assignment of Debt
While many mortgage companies have their own guidelines or ‘overlays’ to investor underwriting guidelines, a Certified Divorce Lending Professional (CDLP™) will know how to handle Court-Ordered Assignment of Debt and the correct verbiage needed in the divorce settlement agreement or separation agreement.
When a borrower has an outstanding debt that was assigned to another party by court order (such as under a divorce decree or separation agreement) and the creditor does not release the borrower from liability, the borrower has a contingent liability. The lender may not be required to count this contingent liability as part of the borrower’s recurring monthly debt obligations if handled properly.
Why Working With a CDLP™ Can Help With Your Marital Mortgage
The key; however, is to work with a knowledgeable and trained divorce lending professional. A Certified Divorce Lending Professional (CDLP™) understands the different requirements of working with contingent liabilities. There can be hidden issues including title requirements as well as payments made by the spouse that is now liable. These hidden issues can result in denied mortgage financing.
The CDLP™ brings tremendous value to the divorce team during the settlement process. Their background knowledge of family law, financial and tax planning, real property, and mortgage financing allows them to better support and assist the divorce team and divorcing homeowners.
Do you have questions about how divorce may impact your ability to obtain mortgage financing? A Certified Divorce Lending Professional’s (CDLP™) knowledge and experience can help make the transition much smoother and more successful for all parties involved.
Working with a Certified Divorce Lending Professional (CDLP™) and incorporating Divorce Mortgage Planning into the divorce settlement may help both spouses obtain new mortgage financing post-divorce.
Contact a CDLP™ today for a copy of the Divorcing your Mortgage Homeowner Workbook, a guide to credit, real estate, and mortgage financing after divorce. This workbook will help you get organized, be prepared, and understand your mortgage financing position whether you are needing to refinance the marital home in an Equity Buy-Out situation or prepare to sell and purchase a new home post-divorce.
If you’d like to start the process of getting a home, come see us at the Tammi Lindley Team. We are Portland’s premier mortgage lenders, offering hundreds of mortgage products so you can pick the mortgage that matches your needs. Contact us today and start the process of owning your dream home.