Financial Facts: Divorce, foreclosure, bankruptcy |

Financial Facts: Divorce, foreclosure, bankruptcy

Bob Kieber
Special to the Daily

Three words that may cause chest pain to a mortgage lender are divorce, foreclosure and bankruptcy. These three little words may stop a mortgage deal even before it gets started. But these three words are not the nail in the coffin if the borrower and the lender plan ahead.

First let’s look at divorce. If there is a current mortgage and one of the divorcees gets the property there is usually a deadline for refinancing as part of the decree. The reason for this is that if the person responsible for making the mortgage payment makes a late payment, that late payment may lower the credit scores for all parties on the mortgage. So the person who moves out may have a more difficult time getting a mortgage on a new home.

Foreclosure can happen for many reasons. The scenario I see most often occurs when the borrower or borrowers have not been prepared for their adjustable rate mortgage increases. The payment goes up to a point where the owners decide that eating is more important than the mortgage payment. Many people may have thought that the adjustable part of the mortgage would not occur. It did and that is one of many reasons why foreclosures are running so high nationwide. Plan ahead and prepare for rate increases, simple but true.

So for those of you who have a foreclosure, it may be difficult to revive your credit but it can be done. Try to keep your other debts paid on time and pay them off early if possible. Even with a foreclosure one may be able to buy a home and obtain a mortgage, it may take a large down payment to do so.

And finally we look at bankruptcy. The old wives’ tale that once you have a bankruptcy you are a good risk because you cannot file again for seven years is only partially true. Yes, you cannot file again for years but as to being a good risk, that may be a fallacy. The problem is that you may not find a lender that will approve you for a loan of any type. If you do find that lender the interest rate may be 3-10 percent higher than the interest rate that someone with great credit may receive. In addition you may be required to make a significant down payment based on the purchase price, and how many people who file bankruptcy have that amount of money lying around.

My suggestion to all that read this article is try to avoid these three things, divorce, foreclosure and bankruptcy. But if you do have to participate in one, two or all three, plan ahead and learn from your experience. You may be able to obtain a mortgage, but it may take some time and work on your part.

For answers to your mortgage related questions call Bob Kieber at (970) 453-4700 or email him at Bob is a local mortgage lender with Millennium Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country. Member FDIC, equal housing lender. NMLS Bank #477710 broker #289610. For tax benefit information please consult with a professional tax advisor. The opinions expressed are those of the individual, and do not necessarily reflect those of Millennium Bank.

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