Meet Jan Parsons, Mortgage Loan Expert

It’s much, much different than regular traditional lending. And it really should start at the front end of the divorce process. There are a lot of traditional lenders who do not work with divorce clients on a regular basis who are apt to make mistakes. And of course, attorneys aren’t going to know mortgage underwriting guidelines either, just as I don’t know how an attorney does their job, so it’s basically the same.

We do not need the final divorce decree, but we do need a fully executed (signed by all parties) and stamped copy of the separation agreement and parenting plan.

Thirty days of paystubs, two years of W-2s for the most recent years and the last two years of their federal tax returns, separation agreement, and parenting plan (if applicable).

Fannie Mae allows us to go up to a 50% debt to income ratio and FHA allows us to go up to a 57% debt to income ratio. I will help my client if they’re right at the edge and need to lower their ratios.

If one of the parties is going to be awarded the marital home and they are both on the loan, then the loan must be refinanced to take the person off…I see a lot of mistakes with this, often a client will be sent to me after their divorced and they’ll say to me, “Okay, I was awarded the home and I’m ready to refinance now” and I review the legal documentation, and they don’t qualify to refinance. Now they’re devasted. So, it’s very important to have a loan officer who works the divorce niche be a part of the process on the front end of the divorce proceeding, so that when the time comes to refinance, they will qualify. I will then send a detailed email to the attorney whose referred the client to me and copy the client on the email detailing exactly what we need in order for their client to be able to keep their marital home or if they are going to purchase after the fact.

Yes, it is a fairly easy process. I think where there may be hiccups, is oftentimes if they want to move directly from their marital home and purchase another home. Sometimes that’s not possible if we must season* those support payments. It might be best if the person who needs support payments seasoned can be allowed to stay in the marital home for six months while the support payments are being seasoned. At that point the home will be sold and the person receiving the support can move from the marital home directly into their new home.

It’s important to me that I specify to my borrower that if their debt to income ratio is super high, we discuss selling the marital home because it may be too much of a hardship for them to keep it.

*Seasoned payments are determined by loan type. Depending on the specific loan type, it may require anywhere from 3 to 12 months of receiving support payments.

I feel like it’s my job to make sure I educate them as well as I can. It’s very important to start this process at the beginning of the divorce versus after-the-fact, so all questions are good questions.

Seasoning Support Payments is a process that is very specific to divorcing couples who find themselves refinancing under one name to keep the marital home or financing a new home after the divorce. If one of the two parties will be using either their spousal support or child support as qualifying income for their loan, they will have to go through a process called “seasoning the support payments.” Basically, this means that the loan officer will have to show the underwriter that the potential borrower has been in receipt of support payments for:

FHA Loan: 3 months
Conventional Loan: 6 months
Jumbo Loan: 12 months

In addition to the time is needed to season the support payments based on the type of loan, there also needs to be proof shown through legal documents that the support payments will continue for another three years.

Example: One party will be receiving spousal and child support payments and plans to use these as a part of their qualifying income for a FHA loan. Before the loan can be approved, these support payments need to be ‘seasoned’ for three months. Once they have received the support for three months, they must then provide legal documentation that these support payments will continue for another three years.

If you plan on using your spousal and/or child support as a part of your qualifying income for a loan, it is important to either receive this by check or through the Family Support Registry. Per Fannie Mae guidelines, the underwriter may approve the loan and acknowledge the seasoning of support payments these payments must be shown to have been paid by the person named in the legal document who should be paying them. This can be difficult when payments are made through direct bank transfers and other such transactions.