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Divorce Lending

Divorce Lending

Navigating a divorce is hard enough but when property is involved it does add another layer of issues.  Learn how a lender will look at your financial picture when you have a home that is part of a divorce.  The approach is different for a purchase or a refinance. These are not the only scenarios but the most common.

Purchase with Contingent Liability

  1. If your borrower wants to buy a house but is still on the mortgage of their current house, this debt does not have to affect their buying power. When a borrower has outstanding debt that was assigned to another party by a court order (such as under a divorce decree or separation agreement) and the creditor does not release the borrower from liability, the borrower has a contingent liability. However, the lender is not required to count this contingent liability as part of the borrower’s recurring monthly debt obligations. The lender is also not required to evaluate the payment history for the assigned debt after the effective date of the assignment. The lender cannot disregard the borrower’s payment history for the debt before its assignment. If a buyout is still needed see below. Download divorce lending flyer

Refinance – Spousal Buyouts

  1. If the borrower has a court order (such as a divorce decree or separation agreement) and one spouse is buying out the other spouse on a conforming loan, the loan is not considered cash- out as long as the spouse keeping the property does not receive any cash-out and all funds are itemized to the spouse on the closing disclosure.
  2. The key in most divorces is that one spouse wants to be removed from title and liability (mainly to protect credit or receive funds). This is the main catalyst in needing to divide up and settle the assets at the earliest possible time frame. The cash to buy out the other spouse is also an issue if cash on hand is not available. Most agreements will state a timeline for removal of the liability and/or sale. Having a court document allows the refinance to be expedited as a non cash-out which saves money.

Value of property

  1. The value of the property (not including alimony, and/or child support) is usually the hardest battle in negotiating the property settlement. Both sides are not usually in agreement on the value of a property. The Appraisal Independence Requirement can help with this. The appraisal is randomly ordered through an Appraisal Management company. All that is required is that the appointment is made by the spouses. This is an excellent tool to use that will save everyone time and money. Alimony, child support and Separate maintenance payments

Alimony, Child Support and Separate Maintenance Payments

  • When the borrower is required to pay alimony, child support, or separate maintenance payments under a divorce decree, separation agreement, or any other written legal agreement and those payments continue to be made for more than ten months, the payments will be considered as part of the borrower’s recurring monthly debt obligations. However, voluntary payments do not need to be taken into consideration and an exception is allowed for alimony. A copy of the divorce decree, separation agreement, court order, or equivalent documentation confirming the amount of the obligation must be obtained and retained in the loan file.
  • For alimony and separate maintenance obligations, the lender has the option to reduce the qualifying income by the amount of the obligation in lieu of including it as a monthly payment in the calculation of the DTI ratio.

** while these are not all the guidelines pertaining to divorce lending, these are the most common that need to be understood. All guidelines and rates are subject to change without notice. **

Call Kevin Retcher 703-799-5626

Licensed in Virginia, Maryland and Washington DC

First Meridian Mortgage Corporation

KSA Insurance Agency

Kevin Retcher, President
kevin@firstmeridianmortgage.com  | Apply Now | Website |NMLS 116922,180004

8305 Richmond Hwy, Suite 12A, Alexandria, VA 22309

703-799-5626 office Ext. 16 | 703-201-6138 cell | 703-799-5636 fax

Recession Risks are high – Mortgage Rates are rising – How to navigate the Market!

The Washington Post

By ABHA Bhattarai Published May 19,2022

U.S. may be barreling toward recession in the next year, more experts say

The U.S. Economy could be heading for a recession in the next year,………

Financial markets fell again on Thursday, a day after the Dow Jones industrial average suffered its worst drop of the year. The S&P 500 inched further into bear market territory – defined as a 20 percent drop from the most recent peak- after Wednesday’s sell-off wiped out more than 4 percent of its value.
“Recession risks are high – uncomfortably high – and rising,” said Mark Zandi, chief economist at Moody’s Analytics. “For the economy to navigate through without suffering a downturn, we need some very deft policymaking from the Fed and a bit of luck.”
This week alone, former Goldman Sachs chief executive Lloyd Blankfein warned of a ‘very, very high risk” of recession; Wells Fargo CEO Charlie Scharf said there was “no question” that the U.S. economy is heading toward a downturn; and former Fed chair Ben Bernanke cautioned that the country could be poised for “stagflation” – a slowing economy combined with high inflation.

“In Alexandria, Va., mortgage lender Kevin Retcher said there is a discernible skittishness among potential home buyers. Refinances began tumbling late last year, around the time the Fed began signaling upcoming rate increases. In the months since, a combination of rising mortgage rates – now at 5.3 percent for a fixed-rate 30-year mortgage, nearly double early 2021 levels – and sky-high home prices have begun deterring buyers, he said. At least three clients have gotten “cold feet” and pulled out of ratified contracts in the past two weeks, he added.
“There is an extreme sense of nervousness out there,” said Retcher, president of First Meridian Mortgage. “It’s rare to have people win contracts and then back out, but that’s what’s been happening.”

           Other types of small businesses say they’re seeing a pullback in consumer demand, too, as customers grapple with rising costs. Aaron Mulherin, who owns a glass repair company in Marion, Iowa, said that while homeowners are continuing to pay for necessities such as fixing broken windows, they’re starting to think twice about spending on luxuries such as custom     showers.”Average, middle-class consumers are starting to hesitate,” Mulherin said. “Everything is getting more expensive, so they’re getting an estimate, then putting it off.”

 

If you would like to contact Kevin Retcher at First Meridian Mortgage call 703-799-5626 email at Kevin@firstmeridianmortgage.com. NMLS ID#180004 WWW.NMLSCONSUMERACCESS.ORG

 

Housing Hustle for Millennial and Gen Z Home Buyers

Housing Hustle for Millennial and Gen Z Home Buyers

How to buy your first home right out of college or grad school .. and begin building wealth sooner than you ever thought possible.

It seems that you can’t read an article on real estate without at least a paragraph bemoaning the “refusal” of Millennial college grads to purchase their first homes. Forget the fact that they graduated during the build-up and aftermath of the Great Recession. Forget unprecedented levels of student loan debt. According to some, these young, highly educated consumers are wasteful with money, unwilling to give up their everyday luxuries to save for a home. One Australian mogul even blamed avocado toast. In reality, of course, Millennial’s are enthusiastically looking for home-buying opportunities.

 

For Gen Z, the desire to buy a home is a paramount goal, and many are just as motivated as their Millennial friends, siblings, and colleagues to begin looking ahead to home ownership. For each of these groups, student loans and lack of wage growth may make home buying seem like a distant goal. The good news? There are a variety of options to help Gen Z and Millennial’s with every step of financial planning for their home purchase.

Your Complete Guide to Millennial and Gen Z Homebuying

Think ahead and create a plan for home ownership that gets you moving into your own home sooner.

Step One: Plan Ahead

If your goal is to buy a home as soon as possible after graduating from college or grad school, you need to begin early building your professional resume. When you first arrive at college, begin early attending job fairs, even if you are not sure what field you want to major in. The experience you will gain in interview skills and networking will help you when it is time to land your first professional gig.

 

Secondly, landing internships should be a big part of your professional planning. Landing an internship early in your time as an undergrad can help make you more competitive and make you a front runner for other highly desirable internships. Even college freshmen can and do get internships, especially when reaching out and networking with friends, family, and other acquaintances.

Step Two: Establish Good Credit

At your first opportunity, get a credit card, even if it is a secured card with a $300 limit. The key is to establish credit as early as possible. Mortgage lenders like to see that you have some credit accounts with at least a 12 – 24 month history.

 

I am often asked if someone can buy a house with no previous credit history and the answer is Yes. However, approval is dependent on the type of financing — FHA or Conventional Fannie or Freddie. These rely on the automated underwriting engine for approval in most cases.

 

The minimum standards get tougher if a manual underwrite is required. It is better to have a few established credit accounts with you as a primary account holder and not as an authorized user. The key, of course, is to ensure that you use the card sparingly and pay it off completely each month. Late payments or carrying the maximum balance will set back your financial goals and stay on your credit report for years. If you currently have blemishes on your credit report, go ahead and pay them now and begin rebuilding your score.

Step Three: Establish Work History and Income

Once you graduate, the key to moving toward homeownership is a salaried job and a work history of two years in your field. The game-changing news for young home buyers? That time you spent in the classroom counts toward your two years of work history! In fact, all of the preparation you did for your job — internships, field work, and classroom experience — counts toward the time requirement.

 

Because commissions and bonuses don’t count as income within your first two years of employment for mortgage underwriting, a salaried job is critical to meeting your lender’s income requirements. However, if your company will guarantee a minimum commission and bonus as part of your employment verification, you may be able to include these as part of your income.

 

As soon as you confirm your new job and salary, contact your lender to start the pre-approval process. Get educated on the cost of a home in your chosen market and the costs associated with your purchase.

Step Four: Save for the Down Payment and Closing Costs

Many College graduates ask how much down payment is required to be able to buy a home. The minimum is typically 3-5% or more depending on the type of financing. Most 3% and 5% down programs do allow a gift from a family member, or money that is remaining from a 529 college savings plan to be used as a gift. In addition, some loan products and programs offer down payment assistance and even grants to help offset costs.

 

Another strategy is to move back home and save money for 6-7 months to buy your home. Once you have saved $15,000 to $20,000 then you can contact a lender to get pre approved to buy a home. Share your goals and plans with your parents; they will usually be happy to help with this process. They may even choose to provide some gift funds to help you bulk up your savings. Be sure to use this time to save as much as possible; don’t allow yourself to spend more just because your living costs are reduced.

 

The final step in the home buying process is closing, where you will need to provide several thousand dollars in taxes, fees, and other expenses. These are called closing costs, and depending on the market they can be very expensive. However, most closing costs can be paid for by the seller, the lender, or the real estate agent or broker. In addition, different mortgage programs and first-time homebuyer programs may provide credits and adjustments to the amount of the closing costs.

Step Five: Put it all together

When you’re ready, talk to your lender about real estate agent or broker recommendations. Work with a trusted professional in your chosen market to ensure you have top-notch advice throughout the process. In addition, your agent will help during the negotiation process for the purchase and after the home inspection. The best part? The seller pays for all real estate commissions, so this professional representation comes at no cost to you.

 

In addition, your lender is a valuable resource for recommendations on title and settlement companies, as well as a variety of other professionals in your market. Don’t hesitate to reach out if you have questions or need a referral.

Benefits and Strategies for Home Ownership

You’ve been together through four years of college. Why not transition into your professional life along with your fraternity brothers, sorority sisters, or college roommates? Renting space to some of your best friends helps to defray your monthly expenses while paying down your mortgage and building equity.

 

You may also choose to purchase your home along with a trusted friend or family member. This can provide another source of income, helping you qualify more easily and helping to offset the cost of the monthly mortgage.

 

Delaying home buying because you might want to travel or you might transfer to a new city? No need. Purchase your home now and start building equity. If you find that your career takes you elsewhere, you can always rent out your home and have a property manager maintain it while you continue to build wealth.

Ready? Let’s get started!

Wherever you are in your college or post-graduate journey, there’s no time like the present to start thinking ahead to your home purchase. Let’s discuss the various strategies and financial products available to help you make your dreams of home ownership a reality. I’m here to help with expert guidance for your DC metro home purchase. Call 703-799-5626 for more information.

Click Here to download your personal guide.

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Rates are subject to change.VA MC-928 | MD4272 | DCMLB3295 | KEVINS RETCHER 116922

Notice; Information about the author: Kevin Retcher is the Owner of First Meridian Mortgage since 1996 and can be reached at 703-799-5636, kevin@firstmeridianmortgage.com. His opinions are his and his alone, and not to be taken as legal advice. Always consult with a licensed professional. Also excuse grammar and spelling, I work with math for a living. © First Meridian Mortgage Corporation. NMLS# 180004 www.nmlsconsumeraccess.org, ©KSA Insurance agency, License NPN 8036794 VA License, Rates are subject to change without notice. Kevin Retcher is a licensed Realtor with Jobin Realty , Springfield Virginia, 703-642-8500