Mortgage and Divorce

[LSMB]

I am getting a divorce, unfortunately.  I would like my wife and children to keep the home, and my mortgage+taxes/ins is about the same as an area rental anyway (~$1200/month).

We have a VA loan (my benefit) @ 5.5% with WF bank.  Two times, about 2 yrs ago 30 days late.  Current (no lates) since then.  Home valued $180,000, outstanding balance is $132,000 so there is equity.  

We would like to have her "take over" the loan.  She might use my VA benefit (you can do this), which on top of equity should reduce risk for a lender.  Her "assuming" or taking over the loan results in minor fees versus close costs and keeps the interest rate the same.  

However, she must qualify on her own, with a front end DTI of 15, but low fico's - EQ 600, TU 605.  She is at $800 in cr card debt out of $2000 avail (recently paid down to improve score), so lower utilization.  Late payments hurting.

Any experts think she can qualify to assume the loan?  If not, qualify for another loan?  We are afraid higher interest rates would make the payment unfeasible if refi'd.  Also, the low score might keep her from a decent rental if she cannot not keep the home (hopefully they check to see we pay our mortgage on-time).

Also, I wonder if she should apply quickly, as the requirements are getting more strict. 

Any insight/advice appreciated!

-MB 

[Anonymous]

Paying down credit cards is the best and fastest way to improve scores. Getting them below 10% is best and you can see a hike in scores up to 60 points once the cc company reports the payment. Although 20-30 pts is more realistic, that would still be enough to get her over the 620 typically required.

Late payments could be a big problem though. How many lates, how recently, and how late (30 days, 60 days, etc.)?

[LSMB]

Thank you!  I did pay down her one credit card.  She has a balance of $800 with $2000 available, down from a $1200 balance last month.  I suppose I could pay another $600 - the simulator does not show much difference.  Will it help that much?

Everything OK the last year except for a Target card, now at zero balance, closed by grantor.  She had a 30 and 60 day late last summer.  One collections, for $176.

Any advice?  Should we just have her apply now, or wait?

TIA,

MB 

[medicgrrl]

Because of the amount of equity in the home she should be able to refinance it without to much problem.  You do understand that if she "assumes" the loan that your eligibility will still be tied to the house, correct?  This will prevent you from using that eligibility for future purchases until she releases it thru refinance or sale.

[GregB]

Since you have a VA loan and you would like to let your wife (soon-to-be-ex-wife) use your VA benefit to refinance, why are you refinancing? You would normally Quit Claim your right to the property and leave the loan alone. I can see if you really wanted to use your VA loan for another property that you might want to force her to refi but that doesn't seem to be the case. Is there something telling you that you must refi at dissolution? It would be unlikely that a judge would allow you to force her to refi in most places.