4 Make or Break Mortgage Qualifying Issues in a Divorce Settlement
I don’t expect a lawyer to have to think about these things. That’s why you have me. But, you become infinitely more valuable to your clients when you understand these four factors that WILL make or break their mortgage qualifying.
If these four elements are mishandled in the settlement (Mediated Settlement Agreements, Informal Settlement Agreements, final decrees or separation agreements in many states), the odds of your clients getting their mortgage loan edges closer and closer to ZERO. Whereas, if you understand these factors, you dramatically increase your clients’ odds of getting the right mortgage loan and, maybe, a loan at all.
Those elements are:
Factor #1: Debt/Income Ratio
Factor #2: Support
Factor #3: Buyouts
Factor #4: Timing
In the following 4 videos and blogs, I will expand – very simply – on each of these. I will warn you, however, that the big secret that makes it all work – the ONE THING that makes the difference - is connecting your client to me and my staff of Divorce-Lending Specialists.
And, candidly, it’s much simpler for you to just say “call The Mortgage Institute; I know Noel, and he will take care of you.” That way, you don’t have to do all the “figuring” for yourself. You just turn it over to me, and we “figure” it out.
But, you will increase your leverage in negotiations by knowing these factors...if for no other reason than to warn all parties that certain things just will not work.
I’ll give you an example. I’ve heard [some variation of] this many times. Let’s say in mediation, opposing attorney Foghorn Leghorn says “We’ll give her [your client] $5,000 a month for two years…any bank will be happy to give her a loan with that income.” (It's best if you say it in the Foghorn Leghorn voice).
First of all, when opposing says the word “bank,” just be aware that he or she probably doesn’t know what they’re talking about. I’m a mortgage banker and I have to get up every morning and find out if guidelines have changed overnight. And, I can just tell you that there is far more misinformation out there than accurate information when it comes to lending standards. Don’t take anyone’s word for a lending standard – and $5,000/month for two years either passes lending standards or it doesn’t – when you’re in a mediation or negotiation. As it turns out, it does NOT pass lending standards. Keep reading.
Don’t even take a judge’s word for it. ESPECIALLY do not take a judge’s word for it.
The only person qualified to make a statement about a lending standard or guideline is the person writing the check.
Secondly, and to my specific example, $5,000 per month for two years counts as $0 in qualifying income for a mortgage loan. That’s right – NADA. ZIP. NOTHING. GOOSE EGG. That’s because – and I’m getting ahead of myself – support income has to continue for THREE YEARS, not a month less.
But, even with that guideline, there are some interesting twists that mean that you can “save the day” for any divorcing person needing a mortgage loan – it all has to do with starting the loan application as soon as possible. More on that later.
For now – and if you’re negotiating before you can see all of the next 4 videos/blogs – just tell them “Hey look, we can make or break the clients’ ability to get a mortgage loan based on our attention to these FOUR FACTORS…
#1: Debt/Income Ratio
So, we’d better get Noel on the phone right now so he can steer us in the right direction.”
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