When Homeowners decide to pursue a divorce, it is fairly common for one of the Divorcing Homeowners to want to stay in (and retain) the home. For purposes of gender neutrality, we refer to the Spouse who wants to stay in the home as the "In Spouse" and the Spouse who departs the home as the "Out Spouse".
With the above in mind, there is typically at least 1 mortgage secured by the "marital home" which is often in the names of BOTH spouses. In addition to wanting his/her share of the equity in the home, the "Out Spouse" will typically demand that the "In Spouse" remove the "Out Spouse" from any mortgage obligations on the marital home as part of a process called an "Equity Buyout."
So how does an "In Spouse" find out if he/she will qualify for an Equity Buyout?
DIVORCE EQUITY BUYOUT - ACTION TIMELINE
Initial consultation with a Mortgage Lender (ideally a Certified Divorce Lending Professional)
- This meeting will serve to communicate specific goals and determine a strategy for success.
- NOTE: To maximize options, this meeting should be held as early in the divorce process as possible
Complete a Loan Application
- As part of this stage, the Mortgage Lender will pull credit
- Supporting documentation (i.e. paystubs, bank statements, etc.) will be requested
Discuss initial Equity Buyout Pre-Approval terms (subject to change while the divorce is in process)
- Your Mortgage Lender should discuss specific strategies and/or logistics
Maximize your chances at success (by following these steps whenever possible)
- Do NOT change jobs and/or reduce hours without speaking with your Mortgage Lender
- Avoid big purchases (i.e. new car, furniture, appliances, etc.0
- Limit use of Credit Cards (as much as possible)
- Continue to pay debts on time (the Mortgage Lender is not done looking at your credit this early in the process)
- Limit withdrawals from Checking/Savings accounts (as much as possible)
- Avoid additional credit report inquiries
- Do NOT apply for any new loans and/or credit cards (this includes "co-signing" for someone else)
Anticipate requests for updated documentation (even an updated credit report) depending on how long the divorce process lasts
- This is the reason why the recommendations in "Step 4" above are so important
Property related analysis
- Review of title history, property appraisal, etc.
- Assuming you are approved for the loan, it is time to "lock in" your interest rate and cost structure
- Sign final Loan Documents (aka "Loan Docs")
- Funding (when the Bank "lets go of the money")
- Disbursement of Funds to the "Out Spouse" when applicable
While different steps may be applicable for each individual divorce case, the above steps can serve as a framework of what to expect.
- Mortgage Lending - CLICK HERE to find a Certified Divorce Lending Professional (CDLP) near you.
- Real Estate - CLICK HERE to find a Certified Divorce Real Estate Expert (CDRE) near you.
- Other Divorce Professionals (Mental Health, Finance, Tax, etc.) - CLICK HERE to find a Certified Divorce Specialist (CDS) near you.
- To access additional Divorce Mortgage Tips (for Homebuyers and Homeowners), CLICK HERE
For more information and/or a referral to a qualified Divorce Attorney, please contact me directly (my contact information is listed below).