Divorce Diaries: Lessons From the Trenches
Welcome to Divorce Diaries, where host Cary Jacobson, attorney and mediator brings you real stories, hard truths, and practical advice on navigating divorce and family law. Whether you're going through it, considering it, or just curious, this is your place for clarity, confidence, and resilience.
Divorce Diaries: Lessons From the Trenches
EP #11: Divorce and Home Financing: Essential Insights with Guest Will Camacho
Making sense of home financing during and after a divorce can often feel overwhelming. Today, we bring you a conversation with mortgage expert Will Camacho, who specializes in bridging the gap between divorce and real estate. This episode is packed with practical insights on how child support and alimony can be leveraged to secure a mortgage but with specific attention to the seasoning requirement many lenders impose. Will sheds light on the significance of consistent income documentation over an adequate timeframe to ensure smooth loan qualification.
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Seasonings is how many months have you received that income? If we're doing child support, you would need to receive that income six months in a row, typically around the same time frame. If the fifth of the month is the time frame you're receiving child support, then we would need to see six payments around the fifth of each month for it to be qualifying income of each month for it to be qualifying income.
Speaker 2:Welcome to Divorce Diaries, where attorney Keri Jacobson brings you real stories, hard truths and practical advice on navigating divorce and family law. Whether you're going through it, considering it or just curious, this is your place for clarity, confidence and resilience.
Speaker 3:Welcome to Divorce Diaries Lessons from the Trenches, where we dive into real-life stories and expert advice to help you navigate divorce with confidence and clarity. I'm your host, keri Jacobson, and today we have a fantastic guest joining us Will Camacho. Will is a senior loan officer and a certified divorced lending professional with First Home Mortgage, bringing years of expertise in helping individuals and families navigate the complex world of home financing. With a deep understanding of mortgage lending, will specializes in guiding clients through major life transitions, including divorce, where financial stability, smart housing decisions, are critical. He's passionate about educating his clients to help them make informed decisions about their future. Will, thank you so much for being here today.
Speaker 1:Thank you, Keri. What an introduction Makes me sound very nice.
Speaker 3:Well, you are very nice and I'm glad that you were able to join me today. So I want to kind of get started. As a certified divorce lending professional, I wanted to, you know, have a conversation about how divorce impacts. You know the lending requirements and that sort of thing. So the first thing I wanted to ask was how does divorce impact an individual's ability to qualify for a mortgage and what, if any, steps should they take early on to set them up for success?
Speaker 1:So that's a great question. So if there is marital property involved, such as the home that they're currently living in, there's a good chance. When they acquired that property, they use both of them to help qualify for that mortgage during a separation. If they're trying to keep the marital home now, it becomes that only one individual is trying to apply to refinance. So so when it comes to qualifications, the same rules apply. You know income, assets and credit, but now we're typically working with less income right now. The caveat is during a separation. This is why we like to work closely with our real estate attorney partners early on in the phase is we can use other sources of income, such as child support and alimony, but they need to meet the seasoning requirements to be able to utilize that income to help qualify for a mortgage.
Speaker 3:Okay, you just used a term that our listeners may not be familiar with. What do you mean by seasoning?
Speaker 1:So seasonings is how many months have you received that income? So if we're doing child support, you would need to receive that income six months in a row, typically around the same time frame. So if the fifth of the month is the time frame you're receiving child support, then we would need to see six payments around the fifth of each month for it to be qualifying income.
Speaker 3:Okay. So it's similar to when someone's purchasing a home. You know they want to see pay stubs, wage statements, tax returns and that sort of thing, but now this may child support and or alimony may be another source of income that that person may be receiving. So you need to verify that. That is correct. Okay, got it. I'm sure that many people underestimate the financial impact of keeping the marital home. What are some of the key factors they should consider before making that decision?
Speaker 1:So I come across a lot of folks where they love the marital home. They raise their children in it and now it's their chance to still keep it in the family name. However, the biggest factor you have to take into consideration is the financial burden. Is this home within your financial means? And if it is, then you have the option of keeping it, Even if you can qualify again. It's a lifestyle change. You go from the security of having sometimes dual income to now relying on yourself, and I do have those conversations with folks that where it may not make sense financially to keep the marital home Now, you don't have to make the decision right away.
Speaker 1:I always advise clients go out and poke around at homes that maybe suit their financial budget for now and then maybe in a few years, if they're comfortable with that payment, they can always upgrade later. But just go around, check out homes in that budget they desire. But yes, it's, it's. It is a conversation and I feel like it's one of those that might take a few months for them to come to realization that maybe the marital home is not something financially they can actually sustain comfortably, while maintaining the yearly or you know vacations and going out to dinner. Again. Their life's changing, so they might have some of those things they might want to start doing again.
Speaker 3:Right. I think sometimes people don't necessarily think about all of the other financial components of it, not just being able to pay the mortgage each month, but are you going to be able to have the same similar lifestyle that you were before?
Speaker 1:Exactly.
Speaker 3:I know that one of the things that a lot of our clients struggle with is that emotional attachment to the home. Like you've mentioned before, you know that this is the kind of the place where they've been raising their kids or they've brought their kids home to, and so how do you help clients balance that emotional desire to stay in the house with the financial realities that it maybe it's not the best financial decision for them to do so?
Speaker 1:I would say that's probably the most challenging part of working with people that are going through separation. Is that emotional piece?
Speaker 3:Right.
Speaker 1:As a trained mortgage lender, we're trained in, taught numbers, black and white numbers and guidelines and rules, and what I really enjoy about working with folks that are going through a separation is we're adding that emotional piece. It really starts with a conversation. Again, they're going to share their stories and then the memories and if they're stuck on keeping the marital home, even though it may not be the most wise financial decision for them, it's not a life sentence. They can keep it for a year, two years, try it and then sell. I've had clients where their children are at that age where they'll be eventually be leaving the home.
Speaker 1:So financially he is stretched but he didn't want to change households until he knew his kids were out of the house and basically on their own. So you know his game plan is in three years is to sell. So it is a conversation. But I tell people it's not a right or wrong. It may change after a year or two years. Again you might get a raise and and then your income might be higher. So it is a conversation. But I I advise people, no matter what, you're making a decision that you feel is right right now.
Speaker 3:Absolutely. And I back to that client that you were kind of referencing that's something that we see a lot of, especially when we've got kids that might be in the high school age. Many times parents want to keep their kids in that same school until they graduate. So I often see a scenario where they're going to keep the house for maybe two, three, four years and then with the intention of selling it later. Whether that's the couple keeping it in joint names and doing that later, or one buying the other out and just kind of holding on for those next few years, one buying the other out and just kind of holding on for those next few years. What would you say some of the biggest challenge for those divorced individuals face when they're trying to refinance a home or purchase a new one?
Speaker 1:In today's environment with mortgage rates, it is definitely payment shock. Yeah, a lot of the folks I've worked with tend to be maybe the caretaker of the household so they might have not been part of the original mortgage acquisition or even the refinance piece. So, just going over that process with them and explaining each step, almost treating them like a first timetime home buyer- right and and going over the numbers, going over the different closing costs, but it is I would say it is payment shock.
Speaker 1:Typically, the home mortgage that they're in now might be 2500 a month, yeah, and to keep that same home there might see an increase of, you know, a thousand dollars a month. So it's payment shock. But also credit credit is can be attacked, especially if they have shared and joint like assets, like credit cards or auto loans. I have one individual almost refused to make payment and the other party may not know because their accounts are synced with their joint checking or something like that. So credit tends to be another factor. Again, getting involved early, where we can start fixing things, is important because if credit's attacked and I've seen it it could take a long time, sometimes beyond whatever the separation agreement allows, to get the credit in condition to be able to purchase or refinance.
Speaker 3:Yeah, I think that credit scores definitely are something that can be impacted in a, you know, a high conflict divorce and you know people just use that as a weapon sometimes and it can definitely negatively impact someone's ability to refinance or get a new property. Yes, what advice would you give someone who's considering buying a house but they're still in that divorce process? Maybe they don't yet have a signed separation agreement and so they're looking at buying something, but they're still in the middle of the divorce process. Any advice on that side?
Speaker 1:So we would still go over their prospective home and try to get them pre-qualified and pre-approved. Where I am collecting documentation to bear everything, verify everything and depending on how the parties feel the progress doing over the separation is, we may actually start going through that pipeline a little bit further. If they feel like it's not moving along, we'll still pre-approve them in essence so they can feel comfortable that they're gonna have a place to move into and what their budget's gonna look like. But if they are still in the early stages or it's just dragging out, we don't want them shopping at homes if it's going to drag out for another six months. So we still treat it as if they're ready to purchase now. Just may. Just call it a contingent pre-approval. It's contingent on that separation agreement and again, we stay in touch with all parties so we can make sure that as things progress, if there's any financial changes in the separation agreement, either the equity buyout piece increases, that we're able to adjust things a little bit on our end.
Speaker 3:Got it, so they can kind of start that process but maybe not finalize things until the divorce or the separation agreement are completed.
Speaker 1:And we have it, where we're ready to go, like once we have everything, we get that separation agreement, we're out the door shopping. So it's not like we have to wait and evaluate it for two weeks. Even on refinances, I will turn the file active, start the refinance process and then, as soon as we get the separation agreement, we throw it into underwriting for final approval and then we're closing the week after just because they really just want to get it over with and I don't want to hold up the process if I don't need to. Okay.
Speaker 3:How closely do you work with attorneys or mediators, or how close would you like to work with in some scenarios on the language surrounding, like the home in the separation agreement?
Speaker 1:So that's a great question. I wish I was more involved. One the people I work with I truly enjoy working with, but I wish I got involved earlier. And there's a lot of misconceived information out there about refinancing and purchasing a home, information out there about refinancing and purchasing a home and especially I think we discussed this before the social media and there's so much bad information out there.
Speaker 1:So the attorneys that treat me as a resource again, I'm free until they settle and even then the borrowers don't pay me. So if I can be a resource early and often that is preferred because at the end of the day we want to treat people as best we can and communication is the greatest tool that we kind of control. And if we can get those folks through this process as comfortable as possible, they're goin and you know at the end to celebrate a separation, feel like we were on thei. Not to sound selfish, but I get referrals from peop going through similar sit people I feel I situations. So the more people I feel I can help, then it multiplies, the more people I can help afterwards absolutely, and how important is having the correct language in the separation agreement.
Speaker 3:How does that impact the ability for someone to go through the refinance or purchasing process?
Speaker 1:It is extremely important. And what's great is, at my company we're headquartered in Maryland. All of our staff is in Maryland. We do have some. We are growing. But if you have a mock separation agreement and you just wanna run it by me, I can have underwriting. Take a peek and see if this verbiage satisfies our needs and also satisfies the client's needs, or even the opposing attorney's needs as well. So again, we're able to do all this preemptive work just to make sure when we do have signatures on the dotted line it will go smoothly. But it is very important because it can determine if someone can refinance or not, or acquire a home or not.
Speaker 3:Right. Okay, if a couple decides to sell their home, what are some of the most important mortgage related issues they should address before listing the property?
Speaker 1:So I wish this was done more often.
Speaker 1:I do understand it is a cost, but I wish they would hire a professional appraiser to come out and do an analysis.
Speaker 1:Unlike a normal sale of home, where both parties are excited about the sale of the home and sense because they're they're usually moving somewhere into the next chapter of life, this selling of a marital asset tends to be a closing of a chapter and both parties want the most, but one party may not be as reasonable to the other. So I always advise the first step getting a professional appraisal, but not by a, an appraiser that may be swayed. I would find one that works with, uh, pretty consistent mortgage lenders because they're going to evaluate the home the same way as if a mortgage lender ordered that appraisal. The next step would be getting a net proceed sheet so they can contact a few real estate agents to kind of see one who may have more experience dealing with separations. You would be surprised about how many realtors do not understand this emotional piece that we just discussed earlier. It is a major part of it and real estate agents are better in queue with those emotions because they're usually seeing clients in person.
Speaker 3:Right.
Speaker 1:So making sure you're working with a real estate agent that one, knows the market, two, does a little bit of business, but three, if they possible, they've have some experience in the divorce arena and separation arena. And then again getting pre-approved for your next step. If it is acquiring, it's getting pre-approved before you sell. Because if we have to wait six months or whatever it may be, you know you sell your home and now you can't purchase because we're waiting on alimony or child support, now you're stuck living with a friend or family member, which is not going to be good if you have a few pets or a dog or, you know, or children, um.
Speaker 3:So it's almost like you're working backwards, getting your finances for the next step correct and then evaluating the home and what that's going to look like as far as net proceeds and how much money you're profiting at the end of the day yeah, I think the appraisal piece is an interesting one, especially for people who are selling, because I don't think many people expect that they need to do an appraisal in that scenario, because it's kind of like, well, let's see who the highest bidder is going to be. But I can see where any third party appraisal could be valuable.
Speaker 1:And the reason I feel like compared to, is if you list the home at the wrong price, that could do more damage to your financial outlook than listing it at the correct price, Even though you're hoping it's a gorgeous home and it's a bidding war again. You have a little bit more emotional attachment to this than the prospective buyers and also the appraiser Right.
Speaker 3:Yeah, what are some red flags someone should watch out for when making financial decisions during their divorce, especially when it comes to purchasing or refinancing a home. Should watch out for when making financial decisions during their divorce, especially when it comes to purchasing or refinancing a home.
Speaker 1:Me evaluating the borrower.
Speaker 3:Yeah.
Speaker 1:Transparency Okay. If they cannot clearly explain how they're paid, that's a red flag. Not clearly explain how they're paid? That's a red flag, Unless they're self-employed, but usually it's. They understand how much they make and where their income comes from. If assets are not clear, they're coming in from someone one and they're not going to disclose who, because eventually we'll need to know if it's a family member or a friend and the type of relationship. If they just say they're gonna, why does it matter? Those tend to start to be little bit of red flags for me. Um, and I don't want to go too far, but the number one mortgage fraud right now is actually residency fraud. People buying investment properties are buying primary residences using primary residence loans and then turning it into an investment property. So if people make, let's say, $200,000 as a household but they're buying a $75,000 property in Baltimore City, we can't say no, but that starts. Underwriting will start to question like why are you buying into this community? Specifically Because that is the largest aspect of fraud right now in the mortgage banking world.
Speaker 3:I can see that because obviously a primary residence interest rate, it is going to be substantially less than if it were an investment property interest rate.
Speaker 1:Yes.
Speaker 3:Yeah, how can working with a mortgage professional, especially a certified divorce lending professional, early in the divorce process benefits someone's financial future?
Speaker 1:So, working with a mortgage lender, specifically someone that specializes in divorce, it's not that the guidelines change in any way, it's just we're a little bit more attuned to some of the nuances that come with more seeing more frequently separation agreements right, more understanding of the bank statements and assets going back and forth like shared bills and stuff like that.
Speaker 1:So, but as far as the future and making sure you're set off correctly, it's just not over extending yourself, making sure you're staying within your budget and not failing. I had one person unfortunately refinance and I advise for them to look at a less expensive option. They refinance just to kind of give it to the exiting spouse that they could keep the marital home if they wanted to, right, but every month thereafter she's been asking to refinance and we just don't have enough equity, nor is there enough savings for it to make any sense. So she's in a position that she put herself into that, unfortunately, may be, you know, not in a great for another year or two right so it's just coming down to knowing your budget and and not having other parties influence your financial decision.
Speaker 1:Only you know how much you make and what you're comfortable spending. Listening to friends about you know keeping the house because he said you couldn't is not a a wise way to kind of set yourself financially absolutely in your experience.
Speaker 3:What is one common mistake you've seen people make during the divorce process that could have been prevented, and how can our listeners can our listeners?
Speaker 1:afford. It is the value of the home and the equity buyout piece.
Speaker 1:Again it's an investment, I don't say a cost, it's an investment of $500 for an appraisal. I have seen it where my client has won and favored with the valuation being estimated and I've also seen it where my buyers have lost substantial amount of assets because they let the other party determine the value of the home. I would say that's the biggest mistake I see is not having the appraisal done or questioning the appraisal. There's not just one appraiser in the state of maryland. Maybe investing and getting two and then splitting the difference could be a very good um process. Again, that 500 investment could save you 10, 20, 30 000 in equity um. As far as the other mistakes, those are just normal borrower behaviors. But when it comes specifically to a separation, I would say it's that a value of the home which determines the equity buyout.
Speaker 3:Okay, and so just to clarify for our listeners, you're referring to if one spouse is buying out the equity of the other spouse.
Speaker 1:Yes, that is correct.
Speaker 3:Planning to stay in the house. So I agree this is something that you know we work with and put the language into the separation agreements as to what that's going to look like and how they're going to determine the value. And I, you know, often tell our clients that it truly is up to them how they do that. Sometimes they can agree. You know this is how much we both think that the house is worth. But most of the time they will agree to having that appraisal done. And I'm curious about this question because I have seen it both ways Many times. They are trying to reduce cost right, and so oftentimes I see that they're going to agree to use the appraisal that's kind of done as part of the refinance. Do you have any concerns about that appraisal that's ordered by the lender versus them getting a separate independent appraisal, that versus them getting a sep appraisal?
Speaker 1:So that's tha because at the end of the, the mortgage company orde, the appraisal that the mo is going to be the one th the home right. However, in some financial situations the value of the home from an appraisal standpoint doesn't really matter. Okay, not much if there's enough equity in the home. There's not a difference of having 30 equity versus 50 equity. But having that appraiser come out prior to a mortgage lender ordering one, getting your own custom appraisal beforehand, could help kind of guide where this ship is going to be going.
Speaker 1:It's tough because I had the situation. They listened to their attorneys, they listened to me, they got their own appraisal done, they decided to refinance, I ordered the appraisal and the appraiser came in higher, which is which is great for my buyer because it was able to save some, some money on mortgage insurance and such. But again, it just kind of shows sometimes, even though we do all the upfront work, you can have two appraisers look at the same property, one on Sunday and sunny, one on Monday morning after hitting traffic, and the values can be slightly different. So again, we can do as much upfront in preparation we can.
Speaker 1:If you do it 10 times you'll end up better than if you didn't do it at all right but for 500, it's one of those investments that it's going to save you tens of thousands of dollars one way or another. Now, if the appraisal comes in much lower on the mortgage side you know I've never done this, but I don't know if it can be done is maybe revisit the the agreement and adjust the equity buyout slightly, because if a borrower's, you know, going to be almost putting themselves in a upside down short sale situation when they cannot refinance, well, that's the issue as well.
Speaker 3:Right.
Speaker 1:So far that hasn't happened, but that could happen issue as well.
Speaker 3:Right, so far that hasn't happened, but that could happen. Yeah, I, in most of our situations I typically see that where the parties are not necessarily specifying a number. Most of the time they're simply kind of creating the formula of how it's going to be determined. You know the appraisal whether it's independent or the lender appraisal, minus whatever the current liens are on the property, the mortgage, second mortgage, home equity line, and then how that's going to. You know how that's going to be divided and whether or not closing costs are going to be paid and that sort of thing. So I think it's less likely you're going to have a scenario where you have to revisit it because you're creating the formula, not the actual number.
Speaker 1:Yes, if you're going that route, that pledges, that kind of reduces the risk. But I've seen it again, I've seen it both ways and again it's sometimes it's the parties just not. They just want a number and they don't trust anyone for a percentage because they may not ever see that appraisal.
Speaker 3:Yeah, Okay, if there was one piece of advice that you could give to someone going through the divorce who is worried about their financial future, especially their ability to purchase or refinance, what would that be?
Speaker 1:If I had one piece of advice to share with people going through the separation is make sure you're working with an attorney that communicates. You're working with parties that communicate. Take the of of your attorney on if they're referring certain peoples because they have trust in that individual. So trust the people you're working with and understand that this is not baking a cake. The recipe is not the same every time. So just understanding that there's going to be nuances, there's going to be a little bit of changes in the formula, but at the end of the day, communication is going to be the thing that kind of saves you as far as if you're going to have a good experience or not.
Speaker 3:Absolutely. Thank you so much. Where can our listeners connect with you and learn more about you and the mortgage process?
Speaker 1:So they can search me up at my website, which is firsthomecom slash Will Camacho, or you can just Google search me Will Camacho and you'll find me, because I have a lot of wonderful reviews from people. But my email address is W Camacho and Camacho is spelled C-A-M-A-C-H-O at firsthomecom.
Speaker 3:Thank you so much for sharing your insights today. We know navigating homeownership and finances during divorce is no easy task, and having the right knowledge and guidance can make all the difference To our listeners. If you found today's episode helpful, please subscribe and share with anyone who you think will benefit. You can find more resources on our website, which is jacobsonfamilylawcom. Until next time.
Speaker 2:Thanks for joining us today on this episode of Divorce Diaries. Remember, every journey is unique, but you don't have to navigate it alone. No-transcript.