We all deal with hesitant customers and clients, folks who are just not sure that they want to "pull the trigger" on a divorce, a filing, a transaction, et al. When it comes to qualifying for a mortgage, there is never an upside to waiting. Several months ago, a client called to find out if she could qualify to refinance the mortgage and roll in a buyout to husband. Yet, when I sent her the link to apply for the loan, she said that her attorney had advised waiting - that, it was too early for her to apply. I asked the reason. There was none - just, "it's not time." I understand that there are many features of a divorce that affect many other issues; and about which I need to know nothing. So, I tend to just let these matters go and not push it with the client or attorney. But, no one - the attorney, the client, opposing, the lender - is ever served well by the client-borrower waiting to "pull the trigger" on getting their financing package in place. Here’s why:
7 Reasons Divorcing Clients
Should NOT Wait to Call Me and Get Started
- Support income pay history. If child or spousal support is needed for qualifying income, a pay history has to be documented. In conventional loans, the minimum pay history required is SIX (6) MONTHS (In FHA it can be as little as 3 months). That's less than my average *pipeline time. I can't tell you how many times a new customer has called just when the settlement was winding down; I realized that an extensive (3-6 months) of support would be required in order to close the loan and I had to tell them "if only you had called a few months ago, I'd have you ready to close by now." It makes no sense to start documenting this at final divorce when a few simple tactics can have most clients already documented and ready to close upon final divorce.
- Credit may need to be enhanced. This takes time - up to two years and rarely less than 4 months (if "credit repair" or even resolving disputed accounts is required). Why not get started earlier than later? There is no down side to starting as soon as possible. If your client does get started, you have given them a 3-4 month head start. That's extra value for your client.
- Avoid last minute rushes and the stress involved. Especially if you are settling and finalizing in the next several weeks, things can get a little crazy if the client is being rushed to get his/her documentation together. Of the top 42 stress producing life events (http://www.stresstips.com/lifeevents.htm), 17 are more than likely present in most of your clients. In the coming years as more research is done – and from my experience these past few years since 2010 - the process of obtaining a mortgage loan (whether refinancing or purchasing) will climb to a more prominent place on that list, no doubt. Suffice it to say for now, the mortgage process compounds the stress already experienced in divorce. The greatest benefit of my help is only realized in the context of a mortgage application - actually getting the deal done, turning "white paper into green money." (See #7) So, the early start strategy can do nothing but help and, most probably, deflect unnecessary strains upon your clients.
- The appraisal. That critical property value has to be determined - often for the purposes of agreeing on buyouts. Appraisals - that is, those which are useful for financing - can only be ordered and obtained by the lender as part of a mortgage application and process. No appraisal ordered simply as part of settlement negotiations can be used (or even consulted) in a mortgage loan application. Of course, the appraisal should be obtained not too early but not too late. The timing is crucial. If ordered too early, the appraisal will expire and will require a "recertification" (at a cost) or an entirely new appraisal. If ordered too late, the settlement will not have time to consider the report of "opinion of value."
- I need to PRE-underwrite (review) the draft of the decree. Many lawyers and borrowers still do not understand that a lender will underwrite every word of a divorce decree - even decrees from 20+ years ago. Why? Among other reasons, all divorces have the potential of creating liability and assigned or contingent debt. But, here's the thing - just as the underwriter's review of the decree takes place only as they underwrite a loan file, so my review is only useful in the context of a full and completely documented loan application. Otherwise, I'd be trying to do something for which I am not trained or licensed - practice law (reviewing decrees and providing some sort of input???). No. I can help most by making sure the loan file is not subject to the unknown - and that means, taking the application early, processing the file and PRE-underwriting the decree.
- You and your client get free consultation - on call, any time, whenever you need it. But, this consultation is more organized, less rushed, more thoughtfully considered and weighed in light of other factors when I have a full loan file in front of me. In fact, it’s the only way I can responsibly consult you and your client. Otherwise, I’m just giving out general outlines of lending guidelines. This is nominally helpful; but, hardly what you need. My consultation is precise and effective inasmuch as I have the necessary information.
- The house. It's usually the biggest issue in regular divorces. Many times, a client will say, "when we get the house figured out, we're ready to finalize." Virtually all of the time, the house and its financing - at least from the perspective of getting the deal done - are intertwined with all other features of a settlement: debts, assets, property, child (support), etc. So, why is it treated as a last minute add-on? How it is handled will affect, like no other feature of a divorce, whether or not financing is obtainable, whether or not we can “turn white paper into green money.”
We can have you ready for court, collaboration, mediation, whatever form the negotiation takes. But, it requires that an application be taken, that documents be vetted and reviewed, that numbers be "crunched" and that values be determined (or estimated professionally). How much different would your next meeting feel if you walked in and said, "my client is pre-approved for a mortgage with a buyout of $XYZ....not only are they 'pre-approved,' but, their loan has been processed, is out of underwriting, the appraisal obtained and the lender is waiting on the final settlement."
Of course, sometimes the client calls as soon possible and we just begin to work with the circumstances, whatever they are. Still, I estimate that there are several thousands of divorce cases each year that could be kept out of financing problems (now, immediate or distant future) by simply getting started with me earlier than later.
I've tried to think about a down side to this - I just cannot come up with one. This is mainly because - if there is a reason to wait, I will have the file in "preliminary" status while pushing off to the future the official application start date, while immediately engaging in the work of developing a realistic and workable pre-approval. It's more work for me up front – but, that's what I want to do. Everyone wins by my early action. Take advantage of it.
*pipeline - The total loans which a loan officer is currently working on but not yet closed. Most loan officers like pipelines of not much more than 45-60 days. Reason? It's simple - they don't get paid on loans that have not closed. A long pipeline means more work with no pay. However, I have structured my business for the past 12 years to anticipate longer pipelines; this is what it takes to serve you and the client.
17 Stress Producing Events Your Clients Are Most Likely Experiencing
(See http://www.stresstips.com/lifeevents.htm) for all 42
1. Divorce (well that's obvious)
2. Marital Separation
3. Marital reconciliation (often there have been attempts at reconciliation; I didn't realize that it produced stress but it makes sense)
4. Major change in health or behavior of family member
5. Sexual difficulties
6. Major change in financial state (e.g. a lot worse off or a lot better off)
7. Major change in the number of arguments with spouse (e.g. a lot more or less)
8. Taking on a significant (to you) mortgage
9. In-law troubles
10. Major change in living conditions (e.g. new house, renovating)
11. Change in residence
12. Major change in church or spiritual activities (e.g. a lot more or less than usual)
13. Major change in social activities (e.g. clubs, dancing, movies etc.)
14. Taking on a small loan (e.g. purchasing car, TV, freezer etc.) [e.g., putting legal bills on a credit card]
15. Major change in number of family get-togethers (e.g. a lot more or less)
16. Holiday or vacation and 17. Christmas [at some point during the course of the divorce process, the calendar is going to produce a holiday, vacation or Christmas.]