Divorce Decrees: Court Ordered & Voluntary Agreements

Divorce decrees play a role in the mortgage application process when the borrowers have gone through a divorce or are in the process of getting divorced. Divorce decrees are legal documents issued by a court that outline the terms of a divorce settlement, including the division of assets, liabilities, and responsibilities between the former spouses. There are two main types of divorce decrees: court-ordered and voluntary agreements.

Court-Ordered Divorce Decrees:

A court-ordered divorce decree is issued by a judge after the divorce proceedings. It is a legally binding document that specifies the terms of the divorce settlement based on the judge's determination of a fair and equitable division of assets, liabilities, and responsibilities. The court may consider factors such as marital property, child custody and support, spousal support (alimony), and debt allocation.

In the case of a court-ordered divorce decree, the terms outlined in the document must be followed by the parties involved. Lenders will typically require a copy of the divorce decree to verify the agreed-upon terms and to determine the borrower's financial obligations.

Voluntary Agreements:

A voluntary agreement, also known as a separation agreement or marital settlement agreement, is a legal document that outlines the terms of the divorce settlement agreed upon by the divorcing spouses. Unlike a court-ordered divorce decree, a voluntary agreement is negotiated and agreed upon by the parties involved without the intervention of a judge.

Lenders typically require a copy of the voluntary agreement to ensure compliance with the agreed-upon terms and assess the borrower's financial obligations.

Key Considerations:

It's important to note that mortgage lenders have their own requirements and guidelines when it comes to considering divorce decrees or voluntary agreements. Here are some key considerations:

• Validity and Enforceability: Lenders will review divorce decrees or voluntary agreements to ensure they are valid, legally binding, and enforceable. They may request proof that the document was properly executed and filed with the court.

• Payment Responsibility: Lenders will determine the responsibility for mortgage payments based on the divorce decree or voluntary agreement. This includes assessing the income, creditworthiness, and financial obligations of each spouse individually.

• Property Ownership: If the divorce decree or voluntary agreement involves the transfer of property ownership, lenders may require additional documentation, such as a quitclaim deed, to verify the transfer and the borrower's legal ownership of the property.

• Documentation: Borrowers will typically need to provide a copy of the divorce decree or voluntary agreement as part of the mortgage application process.