One of the first questions people getting divorced ask is, “Who gets the house?” The answer: Who gets the house in a divorce depends on many factors. These include: Which person wants the house? Which person is in a better financial position to keep the house? What makes sense for the kids? And many more.
It isn’t wise to rely solely on your divorce attorney to determine who gets the house in a divorce. Of course, your attorney can offer suggestions and even recommendations, but to really determine the best outcome when it comes to the house, I would recommend talking to a mortgage professional first. I would specifically recommend a divorce mortgage planner who specializes in this exact scenario.
With 25 years of working in the mortgage industry, I am a Certified Divorce Lending Professional, and I’d like to offer you some guidance while deciding if keeping your house in the divorce is right for you.
Here are five tips when considering who gets the house in a divorce:
1. Be proactive.
Don’t wait. In other words, start your homework as soon as possible. Find out whether you can qualify to keep the house. A mortgage professional will need to determine if your post-divorce income will be considered qualified income, and if it will align with mortgage guidelines, thereby being sufficient to offer you a loan.
What is considered qualified income?
The income used to qualify must be from a continuous, stable source such as employment, social security, pension, child support or maintenance. Mortgage lenders want to see a two-year history of receipt of this income and the likelihood of its continuation. Among other things, the lender will want to ascertain whether you have been employed and earning income for the past two years, if you will be rejoining the work force, and/or if you will you be relying on support payments.
The use of maintenance and/or child support to qualify for a loan is determined by the length of time it has been received. In most situations, lenders must be able to prove a continuous receipt for a minimum of six months and the duration of receipt for a minimum of three years after closing on the loan. This illustrates the need to speak with a mortgage professional so you understand what will be included as qualifying income post-divorce.
2. Consider home maintenance.
When signing on the bottom line in your settlement in agreement to keep the house, you are also committing to maintain the home. Understanding what maintenance might be coming up is important. So, make sure you are aware of the large ticket items and home repairs that might be due in the near future. A home inspection is a necessary service, especially if you have not historically been the spouse responsible for keeping track of these items. The big-ticket items (such as a new roof, furnace, etc.) are often not visible with our untrained eyes. Knowing what you’re signing up for will give you peace of mind that there won’t be any surprises you’re not prepared for.
3. Understand your homeowner’s insurance policy.
When one spouse leaves the home and takes their car or any other policies out of the mix, this might lead to the loss of a multiple policy discount, thereby resulting in higher rates. There could also be claims made on the insurance policy that were long forgotten. When one spouse leaves and one remains in the home, the new policy is underwritten as a new policy, which could potentially result in a very different (more expensive) premium. Knowing this information up front will help you understand what to expect on a monthly basis. This is relevant to your mortgage payment when escrows are involved or to take it into consideration for your budget.
4. Consider your new mortgage payment.
Before you can realistically decide who gets the house in a divorce, you must know what your new mortgage payment would be post-divorce. Choosing to take it on alone can come at a heftier price. If you are keeping the home and buying out your spouse’s equity to remove him/her from the mortgage, that means you are qualifying for a new mortgage with new terms. If there is equity in the home, sometimes the spouse who is staying needs to pay the spouse who is leaving for their portion of the equity. This can be calculated by a trained mortgage professional so you are fully aware of what the new payment would look like after all is said and done.
5. Remember that informed decisions are better decisions.
Knowing all the necessary information up front before making any decisions about keeping the marital home should ideally be done with the help of a mortgage professional. Divorce mortgage planning is a valuable resource available that empowers homeowners to make these important decisions without allowing emotion or haste dictate the situation. Knowing all the information before signing a marital settlement agreement is key in making a sound decision for yourself and your family. Taking into consideration not only the mortgage payment but your desired quality of life after divorce should also weigh into the equation. Think about what you may need to sacrifice if you take on this new mortgage payment. Treat this as a business decision instead of an emotional one. Be informed and take your time to ensure it’s for all the right reasons.
Tami Wollensak is a Certified Divorce Lending Professional (CDLP) for Oak Leaf Community mortgage, a division of Mutual Federal Bank. Licensed to work in all 50 states, Tami has a heavy focus in Divorce Mortgage Planning, and a holistic approach to the process of evaluating mortgage options in the context of the overall financial objectives as they relate to divorcing situations. Tami has worked in the mortgage industry for 25+ years. To learn more, visit www.tamiwollensak.com.