Today I had a 30-minute informational call with a woman in the
early stages of a marital separation. We went over the basics, equity
buyouts, mortgage payments, and the qualifying process. At the end of the
call she told me that she felt so much better knowing not only what her future
mortgage payments could look like, but also that she could afford to keep the
house if that is what they decide. Then she asked me how much she owed me for
the call. Of course the answer was nothing at all.
As a mortgage originator, I am not permitted to collect an hourly
fee. I only get paid if and when someone does their mortgage with
me. A simple fact, but the conversation reminded me that not everyone
knows that! So, I am reminding you today that I am here to help your
clients with mortgage solutions for FREE, and without any obligation.
Considering the fact that getting a divorce is very often an
expensive process, I find that my clients appreciate that I can offer them
advice based on my years of experience without charge, and that I am always
happy to help.
Margie Hofberg, President
Residential Mortgage Center
As many of you who work with me have learned, underwriting a
mortgage is an art, not an exact science. Our job is to set the client up
for success by making their separation agreement fit into underwriting
This month I ran into a somewhat amusing underwriting problem on a
Maryland loan. The underwriter told me that since there was an unsigned
notary page attached to the agreement, the separation agreement needed to be
notarized to be legal. I patiently explained to her that separation agreements
in Maryland do not have to be notarized to be legal and binding. She then told
me that she went on the internet and found something that said that Maryland
separation agreements had to be notarized. When I asked her for the site she
just said that she “Googled” it. After further discussion, she finally
agreed that Google is not necessarily a reliable source for that information
and backed down.
So, the moral of the story is that if your clients are not
planning on getting their signatures notarized, leave out the notary
page! It will lead to fewer questions and concerns from underwriters. And
don’t believe everything you read on the internet.
Have a great week!
Residential Mortgage Center Inc
This month's question is one I hear often. If you have a client
facing a similar scenario as part of their separation agreement, I would be
happy to speak to you or your client. Please feel free to contact me.
I am refinancing to take
my spouse off the deed and mortgage. Per our agreement, I have to give her
$60,000 for her share of the equity in the marital home. My parents have
offered to give me the $60,000 so that I don’t have to increase my loan amount
to cover it. Can I do that and, if yes, how would it need to be structured
to ensure that I can get my refinance approved?
Yes! If the
separation agreement specifies that you need to give your spouse $60,000 as
part of the refinance/equity buyout, we have to verify the source of funds for
the buyout. If the funds are coming from your parents as a gift, they
would have to sign a gift letter stating that there is no expectation of
repayment. In other words, that it is not a loan. We would also verify that
they have the money to give you, and document the transfer of the funds them to
either you or the settlement agent.
This month's question is one I hear often. If you have a client facing a similar scenario as part of their divorce, I would be happy to speak to you or your client. Please feel free to contact me.
Margie Hofberg, PresidentResidential Mortgage Center
Question: I am getting divorced and I really want to keep my house. I am finishing my Master’s degree and will get a better paying job this winter. However, my current income is not enough to qualify to refinance the mortgage. My parents have offered to cosign the loan. Is that possible? Do they have to be on title too?
Answer: Your parents can be non-occupant co-borrowers. Their income and debts are combined with yours and the combination is used for qualifying for a mortgage. They do not have to be added to the title to the house.
Divorce FAQ is a periodic newsletter by RMC with answers to specific questions on mortgages for separating or divorcing couples.
month’s question is about the difference between an equity buyout and a
cash-out refinance. If you have a client with similar questions, I would be
happy to speak to you or your client. Please feel free to contact
is the difference between an equity buyout and a cash-out refinance - and
why does it matter?
equity buyout is a refinance where all the proceeds of the new mortgage go
to paying off the existing mortgage, closing costs, and money to the
leaving spouse as specified in a separation agreement or court
order. None of the proceeds can go to the borrower. This is very
important since a cash-out refinance can be priced from one-eighth to a
half of a percent higher in rate, depending on credit score and
loan-to-value ratio. For this reason, structuring the separation
agreement to reflect the equity buyout can be extremely helpful to the
client who will be taking on a refinance.
If you are using alimony or child support income income to obtain a mortgage, there are a few updates to the requirements that you should know. In order to use support payments as qualifying income, you will need:1. Separation Agreement
2. Documentation of Support History
3. Documentation of Continued Support