What Buyers are Really Asking; Divorce & Life Transitions

Every week I spend time researching the questions buyers are asking Google and ChatGPT before they ever contact a Realtor or lender. My goal is to keep you informed about what your clients are thinking—and to help you answer their questions with confidence.

This Week's Focus: Divorce & Life Transitions

Divorce is one of life's most challenging transitions, and for many people, their home is their largest asset. Unfortunately, one of the biggest mistakes I see is waiting until the divorce is finalized before discussing mortgage financing.

By then, some opportunities may already have been lost.

Here are some of the questions borrowers are asking AI this week:

"Can I keep the house after my divorce?"

Possibly—but the answer depends on much more than simply wanting to keep it.

Can the remaining spouse qualify on their own? Will support income be received, and can it be used for qualification? Is refinancing necessary? These questions should be addressed early in the process, not after the settlement agreement has been signed.

"Does the divorce decree remove me from the mortgage?"

No.

A divorce decree determines who is responsible for the home as part of the legal settlement, but it does not automatically remove a borrower from the mortgage loan. In many cases, refinancing or another approved solution is needed before one spouse is released from liability.  However, this loan will not be considered for the spouse who is  not responsible for the loan, when purchasing a new home.

"Can support income help me qualify?"

Often, yes.

Depending on the loan program and documentation, alimony or child support income may be considered for qualification. The timing, documentation, and history of those payments can make a significant difference.  Typically six months of receipt is required in order to use it.

"Can I buy another home before my divorce is final?"

Sometimes.

Every situation is unique. Factors such as qualifying income, existing mortgage obligations, the terms of the separation agreement, and available assets all play an important role. This is one reason it's so valuable to begin planning early.  I’ve handled these situations before, and so long as there is a court approved property division agreement, it is possible.

Karen's Loan Desk

One of the most rewarding parts of my job is helping clients through major life transitions.

I've worked with many individuals before, during, and after a divorce. While every situation is different, I've learned that the earlier we have the mortgage conversation, the more options we usually have.

Sometimes it's not about finding a loan—it's about creating a strategy that supports the best possible outcome for everyone involved.

The takeaway?

Don't wait until the divorce is final to discuss financing. A conversation early in the process can help avoid surprises and preserve valuable options.

AI Prompt of the Week for Realtors

One of the best ways to use ChatGPT is to communicate with empathy while providing helpful information. Copy and paste this prompt:

Act as an experienced Orange County Realtor. Write a compassionate email to someone going through a divorce who may be concerned about their housing options. The email should be reassuring, educational, and non-salesy. Explain why it's important to speak with a mortgage professional early in the process to understand financing options before major decisions are finalized. End with a gentle invitation to ask questions. Keep it under 300 words.

Realtor Tip of the Week

If you have clients navigating a divorce, separation, or another major life transition, let's have a conversation before the property is listed, refinanced, or awarded in the settlement.

A simple planning session can help answer important questions, identify potential challenges, and give your clients greater confidence as they move forward.

As always, I'm happy to review any scenario, answer questions, or help develop a financing strategy that best serves your clients.

Have a wonderful weekend!

 Karen and the Card Team

FICO SCORING SECRETS & MARKET UPDATES

Market Update

More Inventory, and even more buyers!!!

The spring selling season is here!  The seller’s market continues with demand outpacing inventory.  And, prices continue to rise despite stubborn interest rates. We are seeing more competitive bidding again for many homes.  In order to stand out, buyers must be fully pre-approved and ready to act swiftly.

Rates are high compared to the pandemic period, but are still running close to historical averages.  Expert guidance is key to navigating the mortgage process, especially for first time homebuyers.  Be sure to work with a knowledgeable and experienced lender to streamline the process and ensure a successful close.

Here is the current conundrum regarding rates:  Prices are high, CPI is high, and inflation is higher than the Fed wants.  The Feds will apparently only reduce rates when CPI falls.  Which will only happen when home price appreciation cools.  Which will only happen when there is a sustained increase in housing inventory.  Which will only happen when rates fall.  And, back to the beginning.

 

FICO SCORE HELPFUL HINTS

When planning for a home loan, whether a purchase or a refinance, it is paramount to understand the factors that influence your FICO score.  And, remember there are different scoring models. Clients may tell me what their FICO score is, but when I pull a Tri-Merge from Experian, Transunion and Equifax, which is required for a mortgage loan, the scores are quite different. 

1.      Payment History – Late payments, especially on any mortgage are a critical negative factor.

2.      Credit Utilization – Keep balances to less than 30% of credit available; this is typically the most common issue affecting FICO scores we see

3.      Length of Credit history – the longer you have had credit, the better.  And, being added as an Authorized User to a relative’s long-standing account may help, check with us first!

4.      Credit mix – Installment loans (auto loans) or leases help your score when coupled with revolving credit. And, have at least two or three revolving credit accounts.

5.      Inquiries – typically these have the least effect on your score although consumers believe otherwise.

We frequently work with clients to assist them with credit repair.  Here are some of the most common questions we hear:

1.      Should I pay off my credit cards and/or car loan?  Not necessarily, unless they are affecting your debt-to-income ratio.  You don’t need to be debt-free to qualify for a home loan.  And sometimes it is best to have a small balance on some accounts.

2.      Should I close my credit cards that I don’t use anymore?  After all, I’ve paid them off.  NO!  This will have a negative effect on your FICO score.  The more unused credit you have, the better!!!! Never close an account.

3.      Can I apply for a car loan at a number of places to find the best rate?  NO!  Too many inquiries at one time will temporarily drop your score.

Always discuss any possible changes to your credit cards or loans with your loan officer first.

We are here to help and be your resource!

Karen, Katie and Stephanie

ADVERSITY, OPPORTUNITY AND FAST CASH!

 

MARKET UPDATE - ADVERSITY

The latest news for multi-family housing is developers have slowed/stopped new construction.  This is primarily due to higher interest rates coupled with greater difficulty qualifying for loans.  This will translate into higher rents, particularly in the coastal areas of California where housing is already in short supply and high demand.

Translation:  Prospective buyers should not wait for rates or prices to come down, as neither is likely in the next 12 months.  No one anticipates home values to decrease.

OPPORTUNITIES

We are offering a personal loan program – NOT a Mortgage loan – for auto loans, remodels, swimming pools, debt consolidation, recreation and more.  This is not recorded on your home and has no effect on the low rate first mortgage most of our clients have. The turn time on these loans is extremely short, even overnight, and offers a quick and easy way to access fast cash.

Loan amounts can vary from $5,000 to $100,000.  Loans are underwritten based on income, assets, and credit.  The process is completely digital and there are no up-front fees or prepayment penalties.

Click here for the link to a quick qualification process:  Personal Loan Link

REMINDERS

Real estate taxes are coming due, and must be paid by December 10^th to avoid penalties  The second half taxes are due by April 10th.  Such great timing for Christmas and tax time, huh?

Self-employed borrowers should have their taxes reviewed by us prior to filing if they are considering making a home purchase or refinance in the next two years.  Writing off too many expenses can kill a home purchase or refi, unless you want to use a bank statement loan which carries a higher rate.

PERSONAL UPDATES

I’m writing this from Madera (just north of Fresno)  where I am temporarily staying with my sister who suffered a stroke.  My sister lives alone and we were extremely lucky her daughter sounded the alarm when she could not contact her one morning. 

She is improving daily, and we expect a full recovery.  This has been a big wakeup call and reminder to be grateful every day, keep your loved ones close, always do your best and be kind to all.  And, take good care of your health.

As always, call us with any questions or concerns.

 

THAT WAS FAST! Summer is officially over

No more white shoes, white pants or dresses, right?  Although we think that idea is a bit out of date today, at the Yacht Club white pants are not de rigueur after Labor Day.  Acting as the “Officers of the Deck” this week, we were asked to dress in formal yacht club attire which includes white or blue shirts, grey or khaki pants and navy jackets emblazoned with the Club Bullion.

Now, down to business:

Housing Market Correction

The experts are all weighing in on the likelihood of a “correction” to the housing market. Will prices come down?  There is a good deal of downward pressure on prices.  We may see a swing closer to a buyers’ market in the near future.  But remember, inventory is still extremely low.  No “crash” is in sight.  All the factors make it highly unlikely.

Rates

Up, down and sideways. Last week they hit an average of 6% which is the highest since 2008. However, a graph of average interest rates over the last 50 years in the US shows we are still quite near the low end.  It has been the sudden doubling of rates over the last 18 months that has buyers pushing the pause button.  Affordability has decreased with the rate rise.  Loan applications are down significantly which also means there is less competition out there for willing buyers.

Refinance activity particularly has slowed significantly, and is providing only 30% of current total loan volume.

Conforming Loan Limit Increases

The conforming loan limit, which includes both Fannie Mae and Freddie Mac loans, will rise effective January 1st but many lenders, including APM are already accepting rate locks for conforming loans up to a $715,000 loan amount. The actual new limit could be higher, but most agree that $715K is a safe bet.  What does this mean for borrowers?  Conforming loans are easier to qualify for!  Good news all the way around

Down Payment Assistance

No cash for a down payment?  No problem.  We have programs to assist new homebuyers with as little as $500 cash. With a combination of down payment assistance through various programs, coupled with seller credits to offset closing costs, there is almost no cash required to get into a home.  Of course there are income qualification requirements. 

Don't hesitate to reach out to us with questions!  Enjoy the transition to fall, we can't wait to cool off a bit.

Holy Moly! Hang On Tight!

The current environment is unprecedented on many fronts. Quarantines and Social Distancing, unemployment is mounting, and the havoc in the mortgage industry is staggering. Mortgage lenders are under tremendous pressure on multiple fronts: volume, rate drops, market volatility and "churning" of their loan portfolios, e.g. early payoffs and rate lock abandonment. This causes a lack of liquidity since once locked, lenders hedge their positions and if the lock is broken, it is costly. Servicing income drops dramatically and forbearance (forgiveness of loan payments) isn't going to help.

APM is NOT a loan servicer, so we do not face the risks of the large servicing companies or "aggregators" of mortgage loan pools. However we do have interest rate risk, which is the risk of not being able to sell loans, once closed, at low rates if pricing and rates increase.

The Fed move to drop the fed rate did not, and does not directly affect mortgage loan rates. But the stimulus package to buy Mortgage Backed Securities (MBS) DOES have a downward effect on rates. This in reality is NOT helping since it is motivating so many borrowers to break current locks and/or refinance their loans, causing huge losses to the above mentioned servicers/aggregators.

What does it all mean? We all need to be patient, and wait for the markets to normalize. This may take a few weeks or months. In the meantime, The Card Team and APM are diligently working through our pipeline of refinance loans and, as always, prioritizing purchase loans. One of the steps we have taken is locking all refinance loans for 60 days on a 30 day lock price, to handle the high volume.

We are here to answer any questions or concerns you may have. We continue to open new refinance loans for our clients, and prep them for processing, floating the rate and not locking yet, while waiting for the market to settle down.

5 Tips for your best FICO Score Before You Buy

It is always best to prepare well ahead of time for a home purchase, whether first time or fifth time. We like to begin coaching clients three to six months prior to beginning a home search, to be sure our clients are well-prepared. Your Credit score is extremely important for loan-qualifying purposes, and in order to attain the lowest interest rate.

1. DON'T close any revolving credit accounts; pay them down or off but continue to use them periodically.
2. DON'T pay off any collection accounts; activity in the derogatory section of your credit report can lower your scores. If needed they can be paid through escrow.
3. DO keep all your balances at or below 30% of available credit.
4. DO make all credit card payments on time. A late fee incurred is not reported, unless an account goes 30 days late.
5. DON'T cosign on a loan for someone else. If they miss a payment, your credit will be affected negatively.