Guest Blog: How to Deal With your Mortgage When You’re Getting Divorced in St. Louis

With Mike Swaleh, St. Louis Area Manager, Fairway Independent Mortgage Corporation

Hi, Kate here! (in the blue). I have been impressed by Mike since I met him and had to ask him to contribute to the blog. We connected over our mutual desire to serve military families, and Mike stands out as someone who truly uses his business as a platform to serve. He is always up to date on the best mortgages out there (no small feat, as the rates are always in flux), and personally commits himself to matching the right client with the right loan. Here’s Mike:

As a Mortgage Lender that frequently interacts with people all over the country, I have a unique perspective into some of the broader trends in the financing world. While some of the logistics vary state to state, the concepts are universal. When it comes to figuring how to deal with your current home and mortgage, when and how to arrange new living terms, or the timing of how to do both, there are few questions that are asked almost each time. I’d like to address them for you here so you are prepared to create your own plan in coordination with a savvy Attorney. You see, in dealing with a marital home while going through the process of dissolving that marriage there really are only a few decision points or options. Typically either one spouse is keeping the home and the other spouse is figuring out an alternative, or both spouses are moving on and the marital home will be sold.

Since I’m fairly certain you didn’t arrive at this article looking for entertainment, I’ll get right down to business!

Frequently Asked Home Financing Questions Regarding Divorce Situations:

Question 1. If one of us is keeping the house (Spouse A), and the other is buying a new one (Spouse B), should Spouse A refinance Spouse B off of the current mortgage during the divorce or after it’s finalized?

The most common scenario is that one of the divorcing spouses is going to keep the current home and needs to refinance the other spouse off of the mortgage and remove them from title. Interestingly enough, I get clients who call me assuming that this has to be done before the divorce is finalized as well as clients who assume it cannot be done until the divorce is finalized. In reality, it can be done before or after, and either is equally as common. Really, it has more to do with how quickly the couple can agree on terms, the remaining spouse’s ability to qualify on his or her own, and how quickly the departing spouse needs to deal with their new living situation. Here are some things to think about:

To make this easier to follow, let’s say Mark and Amy are getting divorced, and Amy was a stay at home mom who wants to remain in their family home. Mark is moving out and would like to buy his own home.

1) Can Amy qualify for the current home on her own? Or, will she need to rely on spousal support payments to qualify? Is Amy working part time (which requires a 2 year history before it can be used to qualify for a home) or will she be getting a full time salaried job (which is more likely to be usable on Day 1)?

2) What about Mark? Does he need the current mortgage to be off of his credit before he can afford (on paper) his new home? How will spousal support payments affect his qualifying?

3) What type of coordination is feasible? During the divorce, anything Mark or Amy want to do from a home financing or title transfer perspective WILL require participation of some sort by the other spouse. Once the divorce is final, the final Judgment entered with the Court will serve as evidence of the parties’ duties to one another.

As you can imagine, sometimes decisions are made before thinking through ALL of the above. For this reason, it is a good idea to take your plan of what you would like to do to consult a Loan Officer—a reputable and highly rated one, due to the complexity of the situation—prior to finalization.

Question 2: How do Child Support and Alimony payments affect qualifying for a home?

In short:

If you are receiving support payments, you do not have to tell you lender. However, if you do tell them, those payments can potentially help you qualify for a home, but there are rules you have to meet.

If you are obligated to make these payments, it will impact your qualification for a loan.

The Small Print:

The longer answer regarding the receipt and use of this type of income for mortgage qualifying purposes is that it can help you if you are actually receiving, not just “supposed to be receiving it” and can show at least six months’ history. This is important to understand because oftentimes the spouse receiving maintenance payments is attempting to do something—refinance the current home or buy a new one—before that six-month mark has passed. It’s also import to know this because if you are not making payments you should be making, it could really impact your former spouse’s ability to move on, which could have consequences to you as well. Mortgage policy dictates that this income must meet the following criteria to be used:

1) The payor has been obligated to make payments for at least six months;

2) The payments, if made, are consistently for the full amount;

3) The payments, if made, are received on a consistent basis.

When our borrower is required to pay alimony, child support, or maintenance payments under a divorce decree, separation agreement, or any other written legal agreement—and those payments must continue to be made for more than ten months—the payments must be considered as part of the borrower’s recurring monthly debt obligations. However, voluntary payments do not need to be taken into consideration. A copy of the divorce decree, separation agreement, court order, or equivalent documentation confirming the amount of the obligation will be required, since this does not show on a typical credit report.

Question 3: If I buy or refinance a home prior to the final execution of the divorce, how do I keep my soon to be ex-spouse from claiming ownership?

Now we’re getting into purely legal matters, so you should always pair this response to direct advice from your attorney. This question is complicated, and can vary state by state. Don’t rely on general advice on this one. When consulting with your attorney, you might ask about whether a Marital Rights Waiver could be the right fit for your situation.

I hope you found the answers to these questions helpful, and I’d be happy to answer anything else if you’d like to reach out to me directly!

Husband and father. Branch Manager. Avid sports fan. Aspiring Renaissance Man. Proud to be part of a company that believes in doing the right thing, doing it the right way, and giving back to our communities, our clients, and our Veterans. We create relationships by doing loans the FAIR way. Message me to learn more…today! 
 
Michael Swaleh is a long time student and teacher of the mortgage industry, but his path and experiences are a little different. Originally licensed as a Financial Advisor, Mike moved to mortgages in 2006 around the time he earned his Master’s in Business Administration. Quickly, he rose to the management ranks due to an unrelenting focus on accountability, quality and expectation setting. In 2013, he had the opportunity of a lifetime to star on Food Network’s “The Great Food Truck Race” as leader of the Tikka Tikka Taco truck. He brought with him his Army veteran brother and their uncle, and they sought out to win a food truck! After two months, and seven grueling episodes, they took 2nd place out of 8 teams. It was through this endeavor that he was introduced to the world of web-based marketing. Mike has done it all, and has a lot to share. He graduated with a B.S. in Commerce from Santa Clara University in 2005.

You can get in touch with Mike at mswaleh@fairwaymc.com, and check out his website at fairwayswaleh.com! Mike’s office is in Kirkwood, MO.