Updated: Dec 6, 2018
The Wildflower Group is pleased to feature a guest blog post by Tim Lacyk, Senior Mortgage Loan Officer with AmeriFirst Financial, who specializes in divorce lending.
Items to think about if you own a home and will be divorcing:
· Can I afford the mortgage now that my ex-spouse isn’t paying half of it?
· Can I take my ex-husband off the mortgage…what happens if I don’t?
· Can I buy a new home after divorce…do I even qualify?
Unless jointly-held marital debt is paid in full, it will require either the sale of the asset [home] to pay the loan off, or a refinance to put the debt in just one person’s name. The decision is agreed upon in the divorce decree. Whoever keeps the marital home will be required to refinance the mortgage. As mentioned above, you cannot simply just remove a name from a mortgage; it has to be done via refinance. If you do not properly remove a spouse from a mortgage, you may be held in contempt of court!
Statistically, most marital homes are purchased with combined income. After divorce, 2 becomes 1, and so does income. Cutting income in half means affording half of what you previously could! Historically, that really throws a wrench into an already fragile situation when emotions are high and patience low.
Thus, when considering whether you will keep the marital home or buy a new home after divorce, the fact of the matter is you must look into whether you can actually afford to do so, and do it before the divorce is concluded. So, empower yourself!
Know exactly all parameters of your financial situation now, pre-divorce, and what they will be post-divorce. Doing so determines what you can or cannot do to keep the current mortgage, refinance it, or obtain a new mortgage on a new home solely on your income.
Here’s a cold hard truth. When factoring in qualifying for a mortgage, your income must roughly double that of your mortgage payment. So, if your principal + interest + insurance + tax + HOA payment total is $2000/mo, you need $4000/mo in income. If you have other debt, such as car loan, credit card, etc., those minimum payments are added in addition to the mortgage for a total debt calculation. Therefore, if you have other debt, your income must be even higher! E.g. $2000 mortgage + $500 car + $200 credit card payments = $2700 monthly debt = must have $5400/mo income to qualify for the $2000 mortgage payment. That’s nearly $17,000 more in income a year that is needed!
As you can clearly see, it gets complex with each situation and case carrying its own challenges and benefits.
So what do I do? Take the burden off of you and stop trying to figure it out yourself or blindly let your attorney do it for you – they often overlook your ability to afford a mortgage. Talk with a mortgage professional who specializes in divorce. They know what to lookout for to protect and empower you with retaining or pursuing home ownership post-divorce.
Tim Lacyk is a Senior Mortgage Loan Officer with AmeriFirst Financial, Inc. He specializes in divorce lending. He has a BA from CU-Boulder and his RSC-D™ divorce designation is backed an Ivy League professor and attorney, specializing in Divorce. Contact Tim at TLacyk@AmeriFirst.us — 303-547-0054.