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Divorcing couple sitting on the bed with their backs to each other.

Having Questions About Qualifying for a Mortgage After Divorce? We Can Help.

It has often been said that fifty percent of marriages end in divorce. While several recent articles claim that this is inaccurate and outdated, LegalTemplates claims a 34% increase in sales of their divorce agreements in 2020 when compared to the same period in 2019.

This large increase could be a direct link between the Covid-19 pandemic and strains on marriage. Whether it be from job loss, a shift in normal household responsibilities, or a new perspective, it is no surprise that this pandemic has brought on relationship challenges. Add those challenges with homeownership and you have even more to untangle. If you are at a point in your marriage where divorce is imminent and you need real estate-related guidance, it is important to find the right people who can help.

Mortgage After Divorce – Where to Turn?

Divorce Real Estate Specialist

Angela Matzke
Anglea Matzke

When divorce and real estate are intermingled, it is important to speak with experienced professionals. Denver, Colorado Realtor® Angela Matzke has over a decade of real estate experience. She is specialized in Divorce Real Estate and not only has an RCS-D designation (Real Estate Collaboration Specialist-Divorce ™), but she also earned her CREDS (Certified Real Estate Divorce Specialist™) and CNE (Certified Negotiation Expert™).

Her extensive knowledge base allows Angela to keep her clients informed while offering a deeper level of preparedness. Angela understands that your home may be your most valuable and personal asset and that it should be handled with immense care. It is extremely beneficial to partner with a real estate professional who can provide solid guidance based on each person’s unique circumstances. Angela is more than willing to walk you through each step of your real estate journey no matter your situation and circumstance.

Find a Mortgage Broker Experienced in Complex Situations

Finding a mortgage broker with the knowledge and experience to handle complex situations is just as important. Brian Quigley, Founder of Beacon Lending in Denver, Colorado, also possesses the RCS-D™ designation. With nearly 20 years of experience in the mortgage industry, Brian is excellent at finding solutions in convoluted situations.

While proficient in all types of mortgage financing, Brian is familiar with divorce, bankruptcy, foreclosure, and how to navigate to a lending solution after such a life event. Becoming a Real Estate Collaboration Specialist for Divorce is rewarding to him because every party is looking for a solution and to be on the helping side of that matter. Brian understands the frustrations and questions you may have while steering through this complex stage in your life and, like Angela, is more than willing to meet you where you at in your journey. 

When working with clients, their first step is to meet with divorcing homeowners to explore their options based on the homeowner’s personal circumstances. Angela and Brian want to make sure their clients can make informed decisions surrounding their joint property while also educating them on potential issues with the home and mortgage.

Common money mistakes in divorce

Mishandling matters in a divorce can cost you tens of thousands of dollars. Carol Ann Wilson, a Certified Financial Divorce Specialist, lays out some of the most common mistakes:

  1. Not communicating with your spouse. Couples who can be forthcoming with all financial information may find that their divorce is resolved using less time and money. Hiding documents and/or assets can cause delays, subpoenas, and depositions.
  2. Not understanding section 72(t)(2)(C) of the tax code. This IRS rule allows any money coming from a qualified plan to the non-employee spouse to be spent without incurring the 10% penalty (even if this person is less than 59 ½ years old). Taxes will, however, be owed as this is considered taxable income. For example: If Lisa, age 35, is awarded one-half of Tom’s $200,000 401k, Lisa can take $100,000 in cash if she wishes. Again, this is taxable income, but the 10% penalty will not apply for early withdrawal. An IRA is not considered a qualified plan.
  3. Not understanding the purpose of a QDRO. A QDRO is a Qualified Domestic Relations Order. This is an order from the court that states what amount is to be given to the non-employee spouse in a divorce matter. There are certain instances that can complicate a QDRO such as the death of either party as well as not having the QDRO approved before divorce finalization. It is important that these plan documents are fully read and understood. 
  4.  Violating the front loading of maintenance rule. This IRS rule says that if maintenance is more than $15,000 annually and the payor of maintenance wants to deduct this amount, maintenance needs to be paid for at least 3 years before that amount can change. There are also other front-loading maintenance rules so it’s important to be aware of those.
  5. Not understanding the link between alimony and child support.  An IRS rule says that alimony cannot end or be altered within six months or after the date the child reaches ages 18, 21, or the age of emancipation in their state. 
  6. Not ensuring maintenance. While maintenance usually stops upon the death of the payor, these payments can possibly be covered by life insurance on the life of the payor if no other adequate source of future income exists. 
  7. Not understanding that the alimony should not pay for the mortgage. It never makes financial sense to count on alimony for your house payment. If you cannot afford to keep up with those payments, it is always best to move. 
  8. Not considering the basis of the property. If one party wants to keep living in the home after divorce, considering future taxable capital gain is important if that person ever wants to sell in the future. 
  9. Not consulting a trained divorce consultant. There are so many trained professionals out there. From attorneys to financial planners to real estate agents to mortgage brokers and beyond, there are several people waiting to serve you.
  10. Not hiring a family law attorney. Divorce law is ever-evolving and changing. It is important to find a qualified divorce attorney. Hiring an attorney that does not specialize in the matters at hand can wind up being a costly mistake.

Refinancing A Departing Spouse from Your Mortgage Loan

Photo showing the hands of a couple that is negotiating their mortgage after divorce.

Refinancing off your departing spouse is vital for both of you to move on. Here are some steps you can start taking now to ensure that the refinance is not a difficult one.

  1. Make sure your departing spouse is on the loan and the title. If only on the title, then you will not need to mortgage refinance. You can simply do a quit claim deed from a notary, deeding her/him of the property.
  2. Have your separation agreement in writing and fully executed and signed, so the new lender can see exactly who is getting to keep the home.
  3. Decide exactly how much equity (cash), if any you are going to give your departing spouse, a document that is in the separation agreement.
  4. If you are getting divorced in addition to getting separated, then we will need a copy of the signed divorce decree as well.

For a FREE mortgage refinance analysis in Denver, including credit reports and comparable research on your home, please fill in some basic information below, and we will be back to you shortly.

Rebuilding and Reclaiming: Obtaining a Mortgage After Divorce in Today’s Market

Going through a divorce can be a challenging and life-altering experience, but it doesn’t mean giving up on homeownership dreams. In today’s market, there are avenues to secure a mortgage after divorce. Here’s a guide on navigating the process and rebuilding your financial foundation:

  1. Assess Your Financial Situation: Start by evaluating your post-divorce financial landscape. Understand your income, expenses, credit score, and debt obligations. It’s crucial to have a clear picture of your financial capabilities and limitations before applying for a mortgage.
  2. Strengthen Your Credit: Divorce can have an impact on your credit score. Take steps to rebuild and improve your creditworthiness. Pay bills on time, reduce debt, and address any inaccuracies on your credit report. A higher credit score can increase your chances of qualifying for a mortgage and securing favorable terms.
  3. Establish Stable Employment: Lenders prefer borrowers with a stable employment history. If you’ve experienced career changes or interruptions due to the divorce, strive to reestablish stability in your employment. Demonstrating a consistent income source can boost your mortgage application.
  4. Gather Documentation: Be prepared to provide necessary documentation when applying for a mortgage. This includes proof of income, tax returns, bank statements, and divorce-related financial documents such as the divorce decree, settlement agreements, and any child support or alimony documentation. Organizing these documents beforehand can streamline the application process.
  5. Determine Affordability: Calculate how much mortgage you can comfortably afford. Consider your post-divorce expenses, including child support, alimony, and any other financial commitments. Mortgage lenders typically use debt-to-income ratios to assess affordability, so understanding your financial boundaries is crucial.
  6. Explore Mortgage Options: Research different mortgage programs available in today’s market. Depending on your financial circumstances, you may qualify for conventional loans, FHA loans, VA loans, or other specialized programs. Consult with mortgage professionals to understand the eligibility criteria, down payment requirements, and terms associated with each option.
  7. Consider Co-Borrowing or Co-Signing: If you face challenges qualifying for a mortgage on your own, explore the possibility of co-borrowing with a trusted family member or seeking a co-signer. Keep in mind that this adds additional responsibilities and considerations, so carefully assess the implications and potential risks before pursuing this route.
  8. Consult with a Mortgage Professional: Seeking guidance from a mortgage professional experienced in post-divorce situations is invaluable. They can offer personalized advice, help you navigate the mortgage landscape, and guide you through the application process.

Remember, securing a mortgage after divorce may require patience and persistence. Each individual’s financial circumstances are unique, and lenders have varying criteria. Stay proactive, maintain open communication with lenders, and focus on rebuilding your financial foundation. With determination and the right support, you can embark on a new chapter of homeownership and create a stable future for yourself.

Brian Quigley Profile Photo
Brian Quigley
NMLS#244003
Hello, my name is Brian Quigley and I have been a mortgage broker in Denver, CO since 2003. I have been fortunate enough to choose this very rewarding mortgage broker career and help thousands of borrowers over the years.

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