Asset division is often one of the most contested aspects of a divorce
and with good reason. But when it comes to the marital home, the stakes
are raised even higher. The home's worth only serves to complicate
matters further, throwing many for a loop.
It's only natural to assume that when one spouse wants to keep the
house, the other party wants their name removed from the mortgage. What
sounds simple can actually be quite convoluted. In this scenario, there
are generally two options: refinance or sell.
Why is it so hard to refinance my mortgage?
Should you wish to keep the home, it's important to be aware of some
of the difficulties associated with refinancing a loan of this size. A
mortgage above government-backed loan limits of around $417,000, or $625,500
in areas with a higher price tag, means your income will be closely scrutinized.
According to federal rules, your debt-to-income (DTI) ratio must be 43%
in order to secure a loan. This means your monthly debt payments will
be assessed as they relate to your gross monthly income. Unfortunately,
child support and alimony payments play a critical role in this assessment.
Wall Street Journal article, the CEO of Total Mortgage pointed out that these payments must
be received for 12 months before they're considered a part of your
reliable income. Furthermore, the payments also have to continue for a
minimum of three years after the mortgage starts. But even if you're the one
making the payments, it's not a walk in the park from there. Alimony and child
support payments dip into your monthly income and affect your overall
DTI. Your credit history can also hurt your ability to refinance, especially
without a spouse to raise your score.
Is there anything I can do to make it easier?
Knowing that these issues exist before your divorce means you're already
ahead of most couples. However, always double check your title transfers.
If you don't, errors on your paperwork can only drag the process out
Go one step further by getting your credit approved before your divorce.
Have a lender run a credit check so you know what challenges may be ahead
of you, thus simplifying the refinancing process.
Lastly, work closely with your attorney and a financial adviser. The more
experts you have on your side, the better your chances of keeping your
home. At the Center for Mediated Divorce, our Irvine divorce attorney
has over 20 years of experience and is adept at protecting your rights.
Call us today to find out more!