SEPARATION, DIVORCE AND REAL ESTATE Frequently Asked Questions
After reading my post about getting separated or divorced and buying a home in Maryland, I was asked several questions about separation, divorce and real estate.
I don’t want the house, can I just take my name off the mortgage? Most likely the answer is NO. The person staying in the home will have to qualify for the payment on their own, and will need to refinance the mortgage out of your name.
My ex won’t qualify for the full payments for the house on his own.
You can stay on the mortgage with him until he qualifies on his own, but that full payment will be counted against your income when purchasing a new property. Until the mortgage is no longer in your name, the payment history will affect your credit score, so if you choose this option, keep an eye on the payment history.
The home may need to be sold before you can realize your part of the equity. You may be able to execute a deed of trust for an agreed amount to be paid to you once the property is sold or refinanced. Most separation agreements/divorce decrees include a time frame that this must be done.
If the person staying in the property isn’t able to refinance on their own they may be able to include a co-signer (a parent, sibling, etc.) as a non-occupant co-borrower, allowing them to qualify for the loan.
We are not ready to sell, but we have a renter in the home...
If you can show rental income for 2 years on your tax returns, both the housing ratio and the rental income will be calculated to determine the NET rental income used for income calculation.
If you have equity (the percentage of equity varies by loan program and lender) in the property, an executed lease agreement, documentation of reciept of the security deposit, and rental payment receipt (if any) may allow the lender to omit the housing payment from your debt ratio.
My friend told me that I can use a quick claim so the mortgage, taxes, insurance and hoa won’t count against me.
You are actually referring to a QUIT claim. This legal instrument transfers right and claim from you to another party. By signing a quit claim on the property you will no longer have ownership interest in the home. Please be aware that you will still be responsible for the mortgage until the mortgage is paid off or refinanced. A quit claim should not be entered into lightly and can have major financial impact.
In a separation where a marital/jointly owned home is involved, it will be very important to seek the advice of a real estate attorney. Having a lender with experience in dealing with clients who have gone through separation or divorce can help to make the process a whole lot smoother.
If you are considering purchasing a home in Maryland and want to be sure you are mortgage ready, my brother Tony and I will be happy to help! We help to make the mortgage process a pleasure!
If you already own your home, we are happy to provide a no-cost mortgage review to help you to determine if refinancing may be in your best interest. Please contact me at 410-960-2061.