Dividing Your Home in Divorce: How to Access the Equity

When going through a divorce, dividing your family home is often a big decision.  It is typically stressful and even emotional.  Often, one spouse will want to keep the family home.   If so, then the spouse must be able to buy-out the other spouse’s home equity based on the divorce agreement.

To divide home equity in a divorce, the first step is to obtain an appraisal by a residential real estate appraiser.  Then, you will need to reduce this by the balance of the outstanding mortgage along with any other property liens, property taxes, dues, etc.  Then both of you will need to decide how the remaining equity is to be split.

Contact me to learn more about the type of appraisal you need to request.

Access Your Equity

As you go through your divorce, let’s assume that you will keep the house and give your ex-spouse his/her share of the home equity.  Your house has been valued and the equity has been calculated.  Everything is agreed upon and straight forward.

There’s just one challenge.  You need more money than a Texas Cash Out (Texas 50 (a) 6) will allow.  The Texas Cash Out loan is limited to 80% of the value of your home.  You might be trying to figure out your options if you need more than 80% in order to cover the loan payoff plus the equity interest you must pay your ex.

You may be thinking Texas mortgage rules cap the loan amount and therefore might prevent you from being able to buy-out your soon-to-be-ex’s equity in your home.

While the Texas Cash Out does limit the loan amount to 80% of the market value of the home, there is another way to accomplish the division of home equity. Bust that myth.

In a divorce situation, co-owners may be able to access up to 95% of the market value of the home with an owelty lien for the purpose of a buy out the other spouse.

Home-Divorce-Owelty-LienSteve and Marianne are a great example.  They are going through a fairly amicable divorce and own a home in a beautiful neighborhood near the lake.  They bought the home many years ago at a great price of $350,000.  Steve and Marianne would like for Marianne to stay in the home and keep life as normal as possible for their daughters.

Today, their home is worth $450,000 and they have paid down the mortgage to $300,000.  Thankfully, Marianne has a good job and income and believes she can qualify for a mortgage on her own.  They have come to an agreement they will split the equity 50/50.

Doing the math, there is $150,000 in equity.  Each of them will walk away with $75,000.  Marianne asks around and hears about the Texas Cash Out.  Now she is concerned that she can’t get a big enough loan to buy out Steve.  She needs a loan for $375,000 (the balance of the current loan plus the equity interest of Steve) and the Texas Cash Out will only allow for 80% which is just $360,000.  Marianne is short on funds.

When Marianne calls me, she is feeling overwhelmed and starting to think she will have to sell their home after all.  I ask Marianne if a decree has been written and filed yet.  She says, “no” and that is good news.  After asking other pertinent questions, I determine that Marianne is positioned to use the owelty lien.  She is immediately relieved.

We set about getting her pre-approved for the loan amount.  Marianne provides me the information for her divorce attorney so we can connect.  I provide the attorney the information to ensure the decree is written properly for owelty partition so the owelty lien can be used.

Owelty of Partition

The court decrees an owelty of partition which is used to allow one co-owner of a property to buy the interest of the other co-owner of the property.

Owelty Lien

The lender can finance up to 95%  of the market value of your home when an owelty lien is utilitized.  This way you can buy-out your ex-spouse’s interest in your home.

The owelty lien will allow you to go over and above the Texas Cash Out giving you access to 15% more equity in your home.  This is incredibly helpful to so many people.

Be Specific

When using an owelty lien, your home equity division must be spelled out in the decree in a very specific way.  For instance, when referencing your home, the attorney must include the legal description not just the street address.  The legal description is a lot / block or a metes / bounds description.

Terminology in the divorce decree is equally as important.  The use of the word “equity” could pose challenges for financing with an owelty lien.  Conversely the use of “interest” provides a clear path.

“Award” and “divest” are also important terms that should be included in your divorce decree when splitting the home.

In addition, the tile must be carefully reviewed.  If your present home loan is a Texas Cash Out, then you are stuck.  You will need to refinance with a Texas Cash Out  and cannot use the owelty lien.  Sorry.

You want to be sure this is done correctly so you can take full advantage of the owelty lien benefits.  There are very specific steps that must be taken when dividing the equity of your family home.   For this reason, it is critical to have guidance from a divorce lending professional to work with your attorney. 

Make sure you call me!

The owelty partition is an effective way to use an owelty lien to buy out your spouse.  But if not executed properly, you could be restricted to the Texas Cash Out, limiting you to just 80% of your home’s value.

 

Protect Yourself and Your Tax Refund

We are nearing the end of tax season and many people have already received their tax refund. And some are not so lucky. Instead, they have learned someone else got there first and has their money.

Tax fraud occurs when an individual or business willfully and intentionally falsifies information on a tax return in order to limit the amount of tax liability, or to boost a tax refund. But it doesn’t stop there.

Did you know identity theft can lead to tax fraud? This occurs when someone steals your social security number to file a tax return claiming a refund…a fraudulent refund.

In a mortgage transaction, lenders pull transcripts from the IRS to confirm the tax returns you supplied with your documentation.

Just a couple of years ago during a typical mortgage transaction, my team was able to expose identity theft tax fraud committed against one of my clients. Luckily the theft had occurred just a couple of months prior to his transaction. He was able address it before more damage occurred.

MGIC, an industry resource and provider of mortgage insurance created this info graphic to help illustrate some of the common ways tax fraud occurs, how to protect yourself from tax fraud, and where you can go for help.

Identity theft tax fraud is no fun. Be armed, protect yourself, your identity and your tax refund.

Tax-Fraud-Facts

Dallas Home Prices Continue to Rise

Dallas home prices have been on the move higher for sometime, and continue to rise.  Dallas is one of the hottest markets in the nation.

 

Today, CoreLogic reported home prices have risen from December 2015 to 2016 by 7.2%.  The Dallas market place has seen a rise of 6.6% according to the report.

Just over a week ago, Case-Shiller 20-city composite home price index measured home price increases of 5.6% year-over-year, November 2015 to November 2016.  Dallas is included in this 20-city composite, and had a rise in prices by 8.1%.  Seattle, Portland, and Denver topped the Case-Shiller list with Dallas sliding in fourth spot.

The Case-Shiller index illustrates housing has recovered from the boom-bust cycle that began a dozen years ago.

The ever-so-slight increase in mortgage rates has not dampened home sales nor home prices.

The median price of homes currently listed for sale in the Dallas area is $354,900.  The median rent price in Dallas-Fort Worth is $1550.

Forecast for 2017

The forecast of home price growth for the year ahead ranges from 4.1% to 5.5% price increases, nationwide.  Here is a CoreLogic map and forecast by state, which is fairly conservative.

Home_Prices_Forecast_CoreLogic

Zillow is forecasting home prices will rise in the Dallas area during 2017 at a robust 7.3%, just slightly above this past year. Quite a bit more than CoreLogic.

If you are waiting for home prices to plateau, you might be in for a wait.  To discuss your needs and goals, give me a call.  Or get started with your home loan pre-approval right here.

 

FHA Home Loans Help Homebuyers in 2017

FHA Home LoansFHA home loans help homebuyers from all across the country attain their dream of homeownership. Historically, FHA loans offer more leniency on loan qualifying parameters than any other type loan which makes homeownership available to homebuyers who might otherwise not qualify.

FHA home loans are able to offer easier loan qualifying because of the mortgage insurance premiums which protect lenders from loss if the borrower defaults. Two mortgage insurance premiums are required on an FHA loan, no matter how much of a down payment you make.

Up Front Mortgage Insurance Premium – This upfront premium is rolled into your financed amount and is 1.75% of your loan amount.

Annual Mortgage Insurance Premium – This amount is paid monthly as a part of your monthly total mortgage payment. This rate was just reduced for loans with terms greater than 15 years.

Find out if you qualify for an FHA mortgage, click here.

FHA has reduced its monthly mortgage insurance premiums, near premium rates not seen since prior to Fall of 2010. The previous monthly rate was 0.85% on loans with a 3.5% down payment. That rate has now dropped to 0.60%, effective with transactions dated January 26th or later.

Lower Monthly Mortgage Insurance Premiums Accomplishes Two Things

Lower Payment and Increased Savings

The annual mortgage premium is paid monthly as a part of your total monthly mortgage payment. The lower mortgage insurance premium saves you money on your monthly payment. On a $300,000 loan amount, the lower mortgage insurance premium will reduce your payment by about $62 per month.

Increased Buying Power

The increase in buying power enables you to qualify for a larger loan amount. If you qualified for a maximum loan amount of $300,000, with the lower monthly premium, you will qualify for about $11,000 more. This means you will be able to purchase a home with a price tag of around $14,000 to $15,000 more.

Find out if you qualify for an FHA mortgage, click here.

More good news for FHA Home Loans

FHA home loan limits were increased for 2017 making more homes eligible for FHA buyers. The new loan limit for Dallas-Fort Worth increased to $362,250…up $27,600 from last year which means more homes are available to FHA homebuyers.

FHA home loans require a minimum 3.5% down payment. With the increase in the maximum loan amount to $362,250 in the Dallas-Fort Worth (DFW) area, you can purchase a home with a sales price of $371,539. This means more homes are available to you for FHA financing.

Find out if you qualify for an FHA mortgage, click here.

Be sure to take time to learn all your options to find out if an FHA loan is the right loan for you. Once you know your options, then take action to secure your pre-approval.

The best way to discover your options is to answer a few questions here or feel free to contact me here.

Veteran Home Loan Top 10 Benefits

Did you know the Veteran home loan is available to Veterans, service members and unmarried surviving spouses?  Yet only 12% of those eligible for a Veteran home loan actually have them.  That means 88% of people who have served our country and are eligible for homeownership benefits, that they earned, are missing out.  Are you missing out?

If you are a United States veteran…thank you for your service, and welcome home!  See if you qualify for your VA homeownership benefit, click here.

veteran_home_loan

Here are the Top Ten Benefits of a Veteran Home Loan:

  1. Veteran Home Loan doesn’t require a down payment.
  2. Veteran home loan benefits can be used over and over again.
  3. There is NO Mortgage Insurance.
  4. You won’t be denied a loan based soley on a low credit score.
  5. Despite a foreclosure or bankruptcy you still may be able to obtain a Veteran home loan.
  6. They are guaranteed by the government.
  7. If the borrower has a service related disability, they may qualify for the lender to waive the funding fee, further reducing closing costs.
  8. Veteran home loans are assumable to another eligible veteran.
  9. Seller contributions are allowed!
  10. Both fixed rates and adjustable rates are available.

The Veterans Administration has increased the VA Home loan limits from $417,000 to $424,100 beginning January 1, 2017.  This means you can buy a home using the VA home loan benefit with zero down payment.

It’s easy to get started, click here.

The United States military is the largest employer with over 3.1 million employees worldwide. There are approximately 1.6 million veterans in Texas alone.  Yet too many are not aware of the benefits, so they aren’t taking advantage of this great opportunity.  If you know someone who is a veteran, be sure to pass this information along.  They earned it and we owe it to them to share this information!

If you are a US Vet, again, thank you for your service.  We take a lot of pride in assisting you, our military, in using this well deserved benefit.  You’ve done more than your fair share for me, my family and every other person in America.  We are here to support you and assist you with your home financing, whenever you are ready!

 

Home Loan Limits Increase for 2017

After ten years, the Federal Home Finance Agency (FHFA) will increase its conforming home loan limits for 2017, increasing home buyers financing power.  The conforming limit has not budged since it was raised to $417,000 in 2006, just prior to the financial crisis.

Discover how much home you qualify for, click here.

Conforming home loan limits, which apply to all conventional mortgages delivered to Fannie Mae and Freddie Mac, are set each year by FHFA.  Fannie Mae and Freddie Mac are restricted to purchasing mortgages with loan balances at or below the conforming limit set each year.

According to the 3rd quarter House Price Index report,  home prices are now, finally, above the 3rd quarter home prices of 2007.  After 10 years, home prices have returned to their pre-decline level prompting FHFA to increase the baseline conforming limits.

Conventional and VA Home Loans

The conforming loan limits apply to both conventional financing as well as Veteran home loans (VA Loans).

The 2017 conforming loan limits will increase to $424,100 on January 1, 2017 for single family residences.  Two to four family unit limits are also increasing.

Home Loan Limits 2017

Loans that exceed the established conforming loan amount are commonly referred to as Jumbo loans.  Jumbo loans are typically not backed by Fannie Mae or Freddie Mac, and the eligibility requirements and guidelines are stricter.

Find out how much  home you can afford, click here.

High-Cost Areas

In 2009, loan limits were raised in certain areas where the median home price exceeded the national area.  These are referred to as high-cost areas. There are 234 high-cost areas nationwide which include New York City, Los Angeles, San Francisco, Alaska and Hawaii.

Since the baseline conforming limits will be higher in 2017, the high-cost loan limts are increasing as well to $636,150, which is 150% of $424,100 for one-unit properties.

What does this mean for you?  You can finance a higher priced home without falling into the Jumbo category which carries tougher guidelines.

Find out how much home you can afford, click here.

 

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