The Devil Is In The Details: Timing Is Everything!
Timing is very important. When it comes to managing Divorce Real Estate transactions, there is a need to be cognizant of all the key timelines such as the date on which the divorce petition is filed with the court. Here’s an article that highlights the need to ensure that all the vital timelines are adhered to.
If your client hopes to refinance a current home or purchase a new home after or during his or her divorce, the date on which the divorce petition is filed with the court can be crucial.
Because individuals often experience significant financial changes following a divorce, most lenders will require either a temporary settlement agreement or a final divorce settlement ordered by the court before granting a mortgage loan.
Two issues are paramount: Marital debt and spousal support/maintenance or child support.
Marital debt must be addressed early to clarify which obligations will be the responsibility of each party. Then steps must be taken with creditors to transfer all debt liability to the responsible party.
Spousal support / maintenance and child support will be considered as a source of income for loan qualification purposes, but only if it meets requirements to be considered “qualified income.” This brings the 6/36 rule into play.
Under the 6/36 rule, your client must provide documentation to prove:
• They have received this income for the past 6 consecutive months.
• They will continue to receive this income for at least 36 months following their mortgage application.
Thus, the method of support becomes important. If a non-occupying spouse makes mortgage payments on the current home in lieu of providing cash payments for support, the occupying spouse will be unable to use that as qualifying income. And, if the support payments have a step-down option that goes into effect within that 36-month period, the income will not qualify.
Clients who intend to refinance the current home or purchase a new home due to divorce will be well advised to consult with a Certified Divorce Lending Professional (CDLP) as early as possible. The CDLP will advise and guide them to ensure that they are positively positioned to obtain a mortgage loan and make a fresh start.
© DENISE FONTYN, CDLP, with the Divorce Real Estate Institute, Inc.
Katina Farrell, CDRE is an experienced Realtor & Managing Broker specializing in real estate transactions, with expertise as a trained Certified Divorce Real Estate Expert and a Certified Negotiation Expert. She handles the sale of real property in family law cases as a neutral expert. To schedule a complimentary chat and discover more ways Katina can help you resolve the real estate challenges plaguing your divorce cases, call: 720-295-8848 or email: [email protected]