A Certified Divorce Lending Professional brings the financial knowledge and expertise of a solid understanding of the connection between Divorce and Family Law, IRS Tax Rules and mortgage financing strategies as they all relate to real estate and divorce. Having a CDLP on your professional divorce team can provide you the benefit of:
- A CDLP is trained to recognize potential legal and tax implications with regards to mortgage financing in divorce situations.
- A CDLP is skilled in specific mortgage guidelines as they pertain to divorcing clients.
- A CDLP can identify potential concerns with support/maintenance structures that may conflict with mortgage financing opportunities.
- A CDLP can help you implement a strategic divorce settlement agreement ensuring the best opportunities to secure mortgage financing post-decree.
- A CDLP can recommend financing strategies helping divorcing clients identify mortgage financing opportunities for maintaining the current marital home while helping to ensure the ability to achieve future financing for departing spouse.
A successful divorce settlement is the result of putting the pieces of the puzzle together in such a manner that both divorcing parties come out of the divorce whole.
Timing of Filing Divorce Petition
When a petition for divorce is filed, most mortgage lenders will require either a temporary settlement agreement or a finalized divorce settlement agreement ordered by the court in order to complete and close a new mortgage application and/or loan.
Every divorce is a unique situation and the documentation requirements for obtaining mortgage financing will vary depending on the situation. I understand that this is a very emotional and private time for you and I hope by providing this information I can diffuse some the negative emotions involved.
Where both parties are jointly obligated for the payment of a debt; however, the court orders one party responsible for the payment the debt is considered a “Contingent Liability.” Note: even though the court can order one party responsible for the payment; neither party is released from the overall obligation to the creditor.
The most common instance in a divorce situation is with current mortgage financing. If the court orders one party responsible for the mortgage payment on the marital home, the current mortgage debt is now considered a contingent liability and is NOT counted in the debt to income ratio for the other party when seeking new mortgage financing.
Qualified Income and 6/36 Rule
There is a significant difference between what is viewed as income and what counts as ‘qualified income.’ In divorce situations, there is oftentimes the receipt of maintenance, child support and income from a property settlement note. While each constitutes as ‘income’ – each source must meet specific requirements to be considered as qualified income for mortgage financing.
In order to utilize maintenance and/or child support as income for mortgage financing purposes, each source must meet the ‘6/36’ rule. You must be able to provide documentation showing receipt of this income for the previous 6 consecutive months. Additionally, at the time of mortgage application, there must remain 36 months of future payments due to you. Otherwise, this portion of your actual income can not be considered as income for mortgage financing purposes.