A successful producer applied for a home loan and ran into difficulties. Her business manager knows I specialize in getting difficult loans approved, so he called me. When I received her documentation, I couldn’t figure out why the other mortgage broker failed. She has an 800 FICO, tons of income and a lot of money in reserve. Why was he telling her she only qualified for a high-rate adjustable rate mortgage, and not a standard 30-year fixed?
I asked them for the loan application and found the problem. He made a rookie error. He allowed her to check the box that says she is separated. There are three choices on the loan application, married; unmarried; or separated. It should say, married; unmarried; and “why are bothering to apply for a loan?”
When I dug deeper, I learned that she was not legally separated. Her husband lives in Canada and she lives in the States. They are not living together but never plan to get a divorce. I checked the appropriate box on the loan application and easily got her the loan she wanted.
If you are legally separated, then the final divorce may leave you with less income and/or assets than you have at the time you apply for a loan. That is why most lenders will not approve a loan while you are legally separated. They need a final divorce decree to determine your future income, assets and whether you will pay support. In my client’s case, I knew full well what her income and assets were going to be, because they had lived separately for 30 years. They had no joint assets and neither paid the other support.
The lesson here is simple. If you are planning to divorce and may need a home loan, plan well. Let’s say for example that the two of you are getting along. One will move out and the other will stay in the family home. The one moving out will pay support. In this instance, it may be best to buy the other home as an investment property or second home while you are still married. You can wait until the divorce is final to apply for a loan, but the person paying support may be unable to qualify. I cover that in detail in another article.
It is important to assess each couple’s situation to make sure they will be able to comfortably afford the payment after they divorce, and tailor the loan or loans to meet their future needs and ability to repay. There are tools on my website to help you calculate the DTI in advance of applying for a loan. If the DTI exceeds 43%, you may not qualify.
If you have questions or want help assessing your situation, you can contact me at 877-728-2008; CustomerCare@HollyGustlin.com