Once a marriage dissolves, the emotional fallout is only part of the ordeal. Along with determining whether spousal support is necessary and ironing out possible child custody issues, decisions must be made concerning the division of marital property. As some Georgia couples may be discovering, retaining ownership of a marital home after a divorce may be more challenging than once thought.
Determining which spouse will retain ownership is only part of the process as the house will likely need to be refinanced. If the debt-to-income ratio of the spouse seeking to refinance the loan exceeds the federal guidelines, he or she will not be able to secure a qualified loan. In addition, if the spouse who is to receive spousal or child support is the one applying for the new loan, he or she may be surprised to learn that most lenders require proof that those payments have been received for a minimum of 12 months. Moreover, if the credit rating of the potential borrower is less than optimal, this too could preclude the approval of a refinance.
Conversely, if the spouse with the larger income is the one seeking the new loan, he or she too may face difficulty if his or her debt-to-income ratio is affected by child support or alimony payments. One alternative to seeking a refinance is for both parties to remain on the loan with the agreement that the one retaining possession makes timely payments. One other option could be seeking an unqualified loan that does not rely on federal income guidelines. It is important to keep in mind that unqualified loans comprise a small number of mortgages.
There are some steps that couples can take that may make divorce-related matters easier. Ensuring that title transfers are correct and unencumbered, as well as applying for pre-approval of a new mortgage may ease the path for successful refinancing. Georgia couples who are in the beginning stages of working toward a divorce will likely benefit from the experience available from local resources in order to reach a mutually beneficial solution.
Source: The Wall Street Journal, “In a Divorce, How One Spouse Can Keep the House“, Anya Martin, Nov. 5, 2014