Love is uncertain, your finances aren’t – what to do when the love is gone (Part 1 of 2)
Marci • April 27, 2012
The two of you are separating and suddenly you face not only emotional upheaval, but financial changes as well. At a time when your head is already spinning, you need to wrap your head around the shift in income, the current asset and debt picture and what to do with the house.
The steps you take now will have a huge impact on the final settlement and your life going forward. (No matter how overwhelming it may feel, remember you will have a life going forward!) Take it slowly. Here’s where to start:
STEP ONE – Make lists:
This step will be tedious, but it may be the most useful thing you do as you move through your separation and finalize your divorce.
- List your household ASSETS. You must list everything. From your cash and savings to physical items with a financial value; and don’t forget the little things like travel points!
Take the time to create a list like the one below. It will be time consuming but keep in mind you’re doing it to benefit your future.
| Asset Description | Mine | Yours | Joint | TOTAL | |
| 1 | |||||
| 2 | |||||
| 3 | |||||
| 4 |
2. List your LIABILITIES. Again, you must list everything. Car leases/loans, lines of credit, student loans, all credit cards (don’t forget gas and department store cards), even debts to family members must be on this list.
| Liability Description | Mine | Yours | Joint | TOTAL | |
| 1 | |||||
| 2 | |||||
| 3 | |||||
| 4 |
Now you can see clearly which assets and liabilities are jointly owned and which are in separate names. An important goal in the process is to ensure you both walk away with clean credit. Even while things are being worked out, you must commit to keeping payments up to date.
Wherever possible, have your name removed from credit cards and lines of credit that you do not have access to or that you are not using. If you do not have a card that lists you as the primary card holder, now is the time to get credit established in your name only.
STEP TWO – Work out your Monthly Cash Flow:
This is never fun. Take time to record all of the money coming in and going out. By keeping careful records for a month or two you will see the pattern of spending. This step is essential for two reasons: 1 – it will help you set a budget for your future life and 2 – this will help clarify any future support payments.
With the lists and cash flow behind us, the next post will cover paperwork, the mortgage and hardest of all: talking to your spouse.
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Chances are, buying a home is one of the most important financial decisions you’ll make in your life. And as mortgage financing can be somewhat confusing at the best of times, to alleviate some of the stress and to ensure your home purchase goes as smoothly as possible, here are six very high-level steps you should follow. While it might seem like the best place to start the home buying process is to browse MLS on your phone and then contact a Realtor to go out and look at properties, it’s not. First, you’re going to want to work with a licensed independent mortgage professional. When you work with an independent mortgage professional, instead of working with a single bank, you’ll be working with someone who has your best interest in mind and can present you with mortgage options from several financial institutions. The second step in the home buying process is to put together a mortgage plan. Unless you have enough money in the bank to buy a home with cash, you’re going to need a mortgage. And as mortgage financing can be challenging and not so straightforward, the best time to start planning for a mortgage is right now. Don’t make another move until you discuss your financial situation with an independent mortgage professional. It’s never too early to start planning. As part of your mortgage plan, you’ll want to figure out what you can afford on paper, assess your credit score, run some financial scenarios, calculate mortgage payments, and have a clear picture of exactly how much money is required for a downpayment and closing costs. You’ll also be able to discuss which mortgage product is best for you, considering different mortgage terms, types, amortizations, and features. Now, what you qualify to borrow on paper doesn’t necessarily mean you can actually afford the payments in real life. You need to consider your lifestyle and what you spend your money on. Understanding your cash flow is the key. Make a budget to verify you can actually afford your proposed mortgage payments and that you have enough funds to close on the mortgage. No one wants to be house-poor or left scrambling to come up with funds to close at the last minute. If everything looks good at this point, the next step will be to get a preapproval in place. Now, a pre-approval is more than just typing some numbers into a form or online calculator; you need to complete a mortgage application and submit all the documents requested by your mortgage professional. Only proceed with looking at properties when you’ve been given the green light from your mortgage professional. When you’ve found a property to purchase, you’ll work very closely with your mortgage professional to arrange mortgage financing in a short period of time. This is where being prepared pays off. As you’ve already collected and submitted many documents upfront during the preapproval process, you should be set up for success. However, remain flexible and provide any additional documentation required by the lender to secure mortgage financing. Once you have firm lender approval and you’ve removed conditions on the purchase agreement, don’t change anything about your financial situation until you have the keys. Don’t quit your job, don’t take out a new loan, or don’t make a large withdrawal from your bank account. Put your life into a holding pattern until you take possession of your new home. So there you have it, six steps to ensuring a smooth home purchase: Work with an independent mortgage professional. Put together a mortgage plan. Figure out what you can actually afford. Get a pre-approval. Provide the necessary documentation. Don’t change anything about your financial situation until you take possession. If you’d like to discuss your personal financial situation and find the best mortgage product for you, let’s work together. We can figure out a plan to buy a home as stress-free as possible. Please connect anytime; it would be a pleasure to work with you.
LET'S TALK
MARCI DEANE
MORTGAGE BROKER
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The first step is to start a conversation with me.
