Divorce can be a rough time for a family. Mom and Dad are not experienceing the same marital bliss they once were. There is a chasm that is splitting two lives apart. If children are involved, this can bring chaos to a family that will never truly experience "normal" again - at least with their original family members. . .
(What a way to start off this post, huh? Let me further explain where I am leading you).
So what does divorce have to do with the mortgage business you ask? Homes are always the largest investment a couple will make together - in fact, purchasing a home is the single most expensive investment most people make in their own lives. When divorce is involved, the marital household gets divided up like everything else. For the remainder of the post below, I will explain how a divorcee can recover from his/her separation and purchase a new home to start fresh. Here we go. . .
First of all, divorce hurts. We all know that. But it can hurt less if the following steps are taken to present the best possible loan application post separation. Trust me, if your Realtor does not understand that divorcee's are different than traditional borrowers, your deal could be DOA.
You have to have a completed Separation Agreement/Divorce Decree in hand before trying to qualify for a loan on a new home OR refinancing the marital household to remove the other spouse from chain of title. Assets are divided (like I said earlier) 50/50 in the State of Indiana as long as what came into the marriage from both parties was not protected by a prenuptual agreement. What was gained while married by either party is also split 50/50. Obviously, you cannot split a home in two - that would not make sense - so whomever keeps the kids generally keeps the house as well. Typically, that's the mother. The courts do this so the kids can continue to live as close to "normal" as possible. Whatever "normal" they now have left.
The Divorce Decree will outline how the other assets are divided, who is paying what expenses for the kids, how the kids will be taken care of, etc. If the home is kept by one of the cleaving spouses, a Quit Claim deed needs to be filed on the other spouse's behalf to remove that party from any legal claim they have to the marital property. If this is not done after the first five years of separation, the other spouse becomes a Tenant in Common - and personal judgments can then attach as liens to that home. This can leave the spouse in the household responsible for debts that do not even belong to them personally.
So how do you get a Quit Claim deed prepared? Most title companies will do that for you if you refinance your home right away. It may be cheaper than having your divorce attorney write one up. Title companies are sometimes run by property law attorneys, so that means they have relatively cheap means of drafting said deed. After closing the loan, this just becomes another disclosure you sign to acknowledge consent. . . yada yada yada.
Where am I going with all of this, you ask? If you do not file your Quit Claim deed immediately upon separation of the divorce finalizing, you may be in a world of hurt that will stop you from any finance work on your home you are left with. You cannot even sell the home without the other person's consent. Would you like that? I wouldn't.
Divorce still remains a top contributor to triggering mortgage refinances. Interest rates can be sky high and this will still occur. So what do you need to know in order to streamline the process? I recommend consulting one of us here at Winterwood. Every loan and every family is different. The best thing to do is to take what you have learned here, call me or email me if you have any questions about how to proceed, and we will begin to get your life back in order. But, if you are still holding onto that Quit Claim deed from five years ago - go to the courthouse now and file it! If you have not begun the process yet, but will, my sympathies go out to you and your family. Divorce sucks. Don't make the aftermath harder than it has to be.