After a San Jose divorce, many couples struggle to decide what to do with the home they shared. Even when there’s an agreement on who gets to keep the house, mortgage-related issues can pose a problem.
You might be surprised to learn that mortgage companies are not bound by the terms of your divorce agreement. They do not have to take your spouse off the mortgage just because you’re ending your marriage. If you want to keep the marital home, you’ll likely need to refinance the loan in your name only.
Credit score issues are common among those looking to refinance when they no longer have a spouse to help pull up their score. Lower credit scores equal higher interest rates, although scores below 660 will have difficulty obtaining a refinance at all.
Refinancing can be also be problematic if you have a jumbo loan. Jumbo mortgages are defined as loans above the government backed limits of $417,000 for most areas and $625,000 in select high-price neighborhoods. When refinancing a jumbo mortgage, your income matters as much as your net worth. You must have a maximum 43% debt to income ratio, but alimony and child support payments must be received for at least 12 months before your lender will accept them as reliable income. Non qualified mortgages have a little more flexibility with debt to income ratios, but not all lenders offer these types of loans.
If you’re worried about your ability to refinance, cashing in martial assets to come up with a higher down payment can be helpful because it will reduce your overall loan amount. You may also want to see if your spouse will agree to stay on the mortgage temporarily until you can get your finances in order. This prevents you from being forced to sell the home, although the mortgage will continue to appear on your spouse’s credit report until the loan is refinanced.
To learn more about your options regarding possession of the marital home, contact an experienced San Jose divorce attorney.