Avoid Creating Problems During The Divorce Process

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Going through a divorce is very stressful, and when going through a divorce clear thinking is often challenging.  This is why those going through a divorce need to be represented by a team of professionals they can trust to give them sound and accurate advice to Avoid Creating Problems During The Divorce Process.  However, sometimes a trusted adviser provides advice in an area best left to another professional better equipped to advice in an area outside of their expertise.

This often arises with Attorneys who provide advice Real Estate related instead of directing their client to a professional better equipped to provide advice in that area.  I am encountering this more and more with divorce Attorneys giving bad advice during the divorce process about how the handle a home which is jointly owned by both spouses.  The advice provided often  creates unexpected problems later on when they want to purchase a home again.

A good example of this is when someone jointly owned a home with their ex-spouse and now is looking to purchase a home again.  A problem which occurs fairly often in this situation is when the Attorney advises his/her to Quit Claim the property to the ex-spouse, and in return the ex-spouse accepts responsibility for making the monthly mortgage payments each month.  In turn the other spouse is given a "Hold Harmless Agreement" by the court.  This sounded good, but is bad advice because a "Hold Harmless Agreement" does not remove the liability to the Lender for paying the mortgage. to her, so she agreed to the conditions.

So what happens is when the spouse who Quit Claimed the property to the ex-spouse wants to purchase another home, even though they have enough income to purchase a home in the price range they want, they cannot because they are still responsible for the mortgage on the home they Quit Claimed to the ex-spouse.  Even though they are no longer making the payments on the other property they are still on the mortgage even with a "Hold Harmless Agreement".  Because they are still on the mortgage the mortgage payment of the previous property will still be counted against Debt-To-Income (DTI) Ratios.

This gets further complicated because since this spouse Quit Claimed to the property to her ex-spouse they no longer have any ownership in the property, but still have the liability.  Not a good position to be in when looking to purchase a new property.  This is a lose lose position to be in.  This spouse is still owes the debt on the mortgage, but does hot have any ownership interest in the property. 

This can be easily avoided by contacting a trusted Lender in the beginning, instead of being guided by an Attorney who is not familiar with Lending guidelines.  Anyone who is going through a divorce REALLY needs to talk to a trusted Lender before they agree to anything about there current property.  Borrowers need to know what the pros and cons are for the decision they are making before they make it.  Contacting the Lender afterwords will most likely only end up producing very unpleasant surprises.

This is just one of the many precautions which need to be taken when someone going through a divorce can.  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 future plans, then a call to a trusted Lender before signing the Divorce Decree is a must to Avoid Creating Problems During The Divorce Process.

 

 

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Gabe Sanders 01/11/2018 11:50 PM
  2. Roy Kelley 03/06/2018 01:00 AM
Topic:
Mortgage / Finance
Location:
Connecticut
Groups:
Mortgages
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Tags:
divorce purchasing a new home

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Rainmaker
582,624
Nick & Trudy Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtors, Philly Main Line

Good advice, build a team around you, a realtor, lender and attorney, no one of them knows everything and all can learn from each other. Cannot imagine an attorney suggesting they quit claim the house without refinancing the loan at the same time so they are removed from the loan.

Jan 03, 2018 05:10 PM #1
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Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

wonderful post as always George Souto  with amazing financial information

Jan 03, 2018 05:28 PM #2
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Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

I find the attorneys are the ones that don't take care of the little details in regards to clearing debt or making sure liability is transferred to one or another. Some don't even do the deeds and leave it to us agents to redirect and ask the questions to clean up the mess. It makes it very tricky since we know what should have been done and much of the time it wasn't done correctly. We cannot give legal advice nor should we act like one. 

Jan 03, 2018 06:20 PM #3
Rainmaker
3,391,102
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

Whenever possible get them to have one pwerson in charge or left on the mortgage

Jan 03, 2018 07:03 PM #4
Rainmaker
2,607,325
Sally K. & David L. Hanson
Keller Williams 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce - Short Sale

We recently taught a Continuing Education Class for Attorneys in Wisconsin..QUIT Claim is the most poorly named term in legal language...and there are some attorneys who don't understand the meaning of it.

Jan 04, 2018 02:58 AM #5
Rainmaker
4,000,830
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Good morning George.  This is something I've run across a few times in my real estate career.

Jan 04, 2018 05:21 AM #6
Rainmaker
2,164,526
Nina Hollander
RE/MAX Executive | Charlotte, NC - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

This is a very complicated subject, George... and you are so right... divorcing couples don't know this and many of their attorneys don't either. Great post.

Jan 04, 2018 05:29 AM #7
Rainmaker
1,327,986
Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Hi George, unfortunately, I had a couple of listings of divorcing couples, each one was a nightmare. This is a great post filled with good advice.

Jan 04, 2018 10:25 AM #8
Rainmaker
4,345,379
Roy Kelley
Realty Group Referrals - Gaithersburg, MD
Roy and Dolores Kelley Photographs

This is very good reading for those involved in a divorce situation.

Gabe Sanders reblogged your message.

Jan 12, 2018 06:23 AM #9
Rainmaker
409,893
Pat Starnes, Brandon, MS
Front Gate Real Estate - Brandon, MS
Broker Associate, ABR, 601-278-4513

This is an emotionally and financially tangled situation to find oneself in. It is ALWAYS best to seek the proper legal and financial advice in these situations. Great post, George.

Jan 13, 2018 01:06 PM #10
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