If you’re in the market for a new property, one of your first questions is likely to be – how much can I afford? There’s nothing more discouraging than becoming emotionally attached to a new home. Then, finding out that you cannot qualify and the property you’re targeting is outside of your budget.
Equally difficult to swallow – getting your foot in the door on a home that you truly cannot afford. For more on that, check out my recent Forbes article titled “Can You (Truly) Afford Your Home.”
There are many resources available online claiming to provide information surrounding how much you’re able to afford. However, most buyers quickly come to the realization that these calculations are nothing more than guesswork. The calculators simply don’t have the full picture. There aren’t enough inputs to be able to account for ALL your finances.
The same applies in divorce when a spouse wants (or needs) to retain the marital home. By retaining the home and removing your spouse from the mortgage, you are effectively “purchasing” the property from your spouse. Whether this purchase requires that you pull equity for buyout purposes or not, the simple act of removing your spouse’s name through a rate & term refinance is effectively a purchase transaction.
What’s the most accurate, transparent way of knowing whether you qualify to complete this transfer of ownership?
We introduce you to the Buyout Preapproval Letter (BPAL).
Up until now, most lenders provide preapproval letters for home purchases only. This is indeed useful, as most potential buyers wouldn’t dare make an offer to purchase a home unless they know (for certain) that they can qualify for the loan they need.
What makes a refinance, especially in divorce, any different?
In our eyes, there is no difference.
If you’re retaining the marital home and refinancing to remove the out-spouse, whether it’s by free will or by force, you don’t want to enter the woods without a map. In other words, you shouldn’t agree to such a clause in your settlement agreement unless you know for certain that refinancing is a feasible option.
What’s the consequence of skipping over this important piece of due diligence? Well, most settlement agreements state that the in-spouse is to refinance within a specified time frame – or forced to sell. That’s right, if you can’t meet the terms of your settlement agreement, you may be forced by the Courts to sell your home outright as the only option of wiping the out-spouse clean of this debt.
By obtaining a Buyout Preapproval Letter (BPAL) in divorce, you are assuring yourself (and your spouse) that you can and will be able to retain the house in your name alone.
The value of obtaining this early-on in your settlement discussions is that the preapproval analysis is able to account for ALL the variables of your divorce. For example, let’s say there is a proposal on the table for you to receive $3,000/month in spousal support. You’ll be able to quickly determine whether this income figure is sufficient enough for you to qualify. If it’s not, you’ll know exactly what amount you need to negotiate for if you want to keep the house.
It’s that simple.
We listened to the most common gripes that we hear from divorcing individuals, and we created a solution.
A Buyout Preapproval Letter will give you the peace of mind that you need to move forward with confidence.