W. Tyler Moore, PC

Applying for a mortgage after a high value divorce

When it comes to property division and divorce in Texas, decisions will need to be made regarding the family home. If a party keeps the home, he or she will need to have it refinanced in his or her name. If a party was not awarded the home, he or she will want to buy a new one. And, if the parties agreed to sell the home and split the proceeds, they will both be purchasing a new home. In any of these situations, a person may need to apply for a mortgage. The following are some tips for those who are planning on refinancing or purchasing a home post-divorce.

With regards to assigning debts in the property division process, the divorce decree should not use general language such as "Capital One credit card." Instead, it should include each creditor's name and account number as well as how much is still owed on the card. Also, both parties must make sure they pay their credit card balances on time, to avoid dings on their credit report. In general, unless steps are taken with the creditor to remove one's ex as an account holder, both parties are still responsible for credit card payments, despite what a divorce decree says.

In addition, if a party is awarded spousal maintenance, in general six months must pass before these payments will be counted as income when it comes to applying for a mortgage. Also, such payments must be received for a minimum of three years following the date the mortgage was granted. Therefore, some may find it advantageous to receive a smaller amount of spousal maintenance each month, but for a lengthier time frame. Also, any property distribution payments a spouse is awarded in the divorce will not count as income when it comes to obtaining a mortgage.

It is important when negotiating a divorce, especially a high value divorce, to understand how the division of assets and liabilities will affect one's life once the divorce is over. This is especially true when it comes to buying a home or refinancing a home post-divorce. A poorly drafted divorce settlement could cause problems in the long run. Since this post does not contain legal advice, people going through a divorce may want to consult with an attorney. This way, they can make informed decisions that are in their best interests.

Source: floridatoday.com, "Dyer: Avoiding complications from a divorce when home buying," Bobbie Dyer, March 21, 2018

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