Divorce FAQ

If you have any questions, please feel free to contact us.

Over the years, we have received many questions from divorce attorneys and their clients. Below are some questions that we often receive. If you or a client of yours is facing a similar scenario, we would be happy to speak to you or your client.

Separation Agreement

I will need to use spousal support to qualify for a mortgage. My separation agreement states I will receive $2000/month of spousal support plus 25% of my wife's quarterly commissions. Will I be able to buy a house and qualify for a mortgage using this formula?

The lender will only be able to use the $2000/month for qualifying purposes. Support must be a specific number and not a percentage to be able to be used for qualifying income for a mortgage.

I am going to keep the house and refinance it to take my spouse off the mortgage and give him his equity buyout. We have established the amount of money I will be giving him. We have not finished making decisions on the division of other assets. Can I refinance now?

You can refinance now as long as you have a signed agreement that clearly explains the terms of the equity buyout. However, most separating couples do not do that because it eliminates the option of trading other assets for equity in the home.

I will be using support as qualifying income for a mortgage. Do I need to be divorced or have a recorded separation agreement to use that income?

You do not need to be divorced or have a court-ordered or recorded document. The separation agreement just needs to be signed.

Income

I will be using support income to qualify for my equity buyout of the marital home. My spouse and I have two bank accounts; she will be taking over control of one of the accounts, and I will use the other. Do we need to take each other off the account we are not using?

Absolutely, yes. To use support as qualifying income for a mortgage, the payment must come from an account in one person’s name and into an account in the other person’s name. A joint account will disqualify these payments as support income.

I will be using support income to qualify for a mortgage. I just got my first payment last month. How long do I have to wait until I buy a house?

You will need six months of support history before closing on a mortgage. You can apply for a mortgage before you receive the sixth check; you just can’t close until that payment is received.

I will need to use child support to qualify for a mortgage. My son is 16, and the support will end when he turns 18.5 and graduates from high school. Will I run into any problems getting a mortgage?

Unfortunately, you will not be able to use child support to qualify for a mortgage. All support must continue for at least three years after application. I have seen clients lower the monthly amount and lengthen the time of support so that the total amount is the same, and then it can be used.

I have been receiving $5000/month from my spouse. It comes from an account just in her name and into an account just in my name on the 15th of each month for the past year. We just signed our separation agreement, and the support in the agreement is going to be $5200. Will I be able to use my history of getting support prior to signing my agreement to count towards the six-month history required to get a mortgage?

Yes, you will! We will only be able to use $5000/month towards qualifying income, but the history will work.

After being out of the workforce for the last 15 years to raise my children, I just started a job. Will I be able to use that income to qualify for a mortgage

If you have not been working for a while, then we need a six-month history at your job before we can use the income to qualify.

I have found a new job that will pay me 50% more than I currently make. Will I be able to use that higher income to qualify? If yes, how long do I need to be at the new job?

The good news is that if you are switching jobs, all we need is your signed offer letter, and we will be able to use the higher income to qualify as long as you will get your first paycheck by the time you go to closing on the mortgage.

I am retired and getting divorced. I am 69, and my income is from Social Security and a small pension. I will also retain two million dollars in a 401K. Will I be able to qualify for a mortgage?

We will be able to use your Social Security and pension. We will also be able to impute an income using the retirement assets. We can divide the asset by 240 months, which is over $8000/month in imputed income, which will likely be enough to qualify you for a mortgage.

My husband wants to give me support as a lump sum each year. That sounds fine to me, but I am going to need to get a mortgage. Will I be able to qualify

The support needs to be monthly. It can’t be a lump sum or annual payment. So, an annual support payment will not work as qualifying income for a mortgage.

I will be getting spousal support. It will be $3000 in year one, $2000 in year two, and $1000 in year three. Will I be able to use $3000 as qualifying income for a mortgage?

The lender will use the lowest number during the three years as support income, so in your case, it will be $1000. If you need more income to qualify, you may consider evening out the payments to $2000/month, which would result in the same total amount but would give you more qualifying income.

Equity Buyout

I am going to keep the marital home and do an equity buyout. We need to do an appraisal to value the home. If I get an appraisal now, will I be able to use it for my refinance?

Appraisals are not portable. So, if you do an appraisal outside of the refinance process, you will not be able to use it for your refinance. However, since refinance appraisals are good for 120 days and can be re-certified for an additional 60 days, you can start your refinance process, get an appraisal and use it for both the equity buyout and refinance. Your lender would just put your application on hold while waiting for the signed separation agreement and equity buyout amount before closing the refinance.

I am closing on my refinance equity buyout next Monday. How and when will my spouse get his equity buyout?

When you close on any refinance, federal law gives you a three-day right of rescission in which you can say that you don’t want the loan. So, if you close on a Monday, you will have Tuesday, Wednesday, and Thursday to cancel the loan; if you don’t cancel, it automatically funds on Friday. The funding day is when your current mortgage will be paid off, the deed will go to recordation, and the equity buyout is wired to your spouse. This is all coordinated through the settlement company closing your refinance.

My separation agreement will have a formula for the equity buyout rather than a number. If I refinance to take cash out to fund the equity buyout, will the lender allow a formula instead of a number?

The lender can use an equity buyout formula from the separation agreement. I usually add an extra step to prevent misunderstandings. When there is a formula in the agreement, I write a separate document for the file. I take the agreement in the formula and put numbers next to each line. Then I ask both spouses to sign to ensure we all see the numbers the same way. They are encouraged to share this with their attorneys if they are not sure or if anything is unclear. The goal is to make sure we are interpreting the agreement correctly for the equity buyout.

I noticed that my current mortgage has an escrow balance of $3000. What happens to that money once I refinance?

The escrow balance is sent to the house within 20 business days of the loan funding. It will be made out to whoever is currently on the loan. If you think only one of you should be entitled to the escrow refund, you may want to discuss this with your attorney. In the DC metro area, where real estate taxes can be high, the escrow balance is often thousands of dollars.

Buying a Home

My spouse is keeping the marital home and refinancing to do an equity buyout. I want to buy a new house right away. However, most of my down payment money will come from the equity buyout. Can I get prequalified to buy a home without the equity buyout being completed? Will a seller accept my offer subject to the competition of the refinance?

You can get prequalified to buy a home before the equity buyout is complete. As to whether the seller would accept the offer subject to the completion of the refinance, it depends on what other offers they have for the house! However, I have seen this done successfully, especially with a call from the loan officer to the listing agent to explain the situation.