My wife and I are getting an amicable divorce. Our house is paid in full and we will be selling it in a couple of months, but we need money now to care for one of our children. We will probably need about 25-40% of the home’s value. A HELOC seems like the best option.
That said, the house is in both our names. Years ago, my wife defaulted on a substantial amount of unsecured debt, and I have been spending everything I earn for my son. I’m afraid that we won’t be approved for any sort of home loan.
Does anyone have any suggestions how we could access our equity? I wouldn’t mind taking the interest out of the equity just to get us through this but I doubt that any banker would want to hear that. Can anyone suggest a way to present this to our lending officer, or are there any reasonable alternatives? Should I just go to the bank tomorrow and ask them?
The very best thing that could happen would be for you to sell your house this afternoon and split the equity with your wife so you can help your child. But that isn’t likely, especially in today’s housing market.
The only thing you can do is see what your loan officer says. I probably wouldn’t play up the “getting divorced” part of it, though. Things are shaky enough in Loan World.
You both need to get copies of your credit reports, pronto, if you haven’t already done that. You need to know what potential negatives there might be listed.
You can get one free copy every twelve months from each of the credit bureaus by going through http://www.annualcreditreport.com; for an additional fee of about $7-8 dollars each, you can also get a credit score from each bureau. Your bank will use that information to develop their own credit score and they’ll have their own assessment of risk, but scores from the credit bureaus will give you a rough idea where you stand. (If you choose to buy only one score, buy your score from Equifax.)
How long ago did your wife default? Were there any public judgments against her as a result of that default?
Putting money into remodeling a house, even if it needs it, just to sell it a few months later, is almost always a bad idea. It’s very unlikely you’ll get the improvement money back. The best bet is to make inexpensive DIY cosmetic improvements, minor repairs that are obvious, cleanup the landscape, maybe some minor painting, things such as that. Your OP implies that you might just be digging a deeper financial hole at a time when things are already unstable. I don’t know the situation in your area, but the U.S. housing market is very soft in almost every area, some worse than others. You’d be smart to find a way to postpone the sale for a year, or two, and concentrate on improving your financial/medical problems.
You can probably find someone to loan you the money w/ the house as collateral, but I’d guess you’re going to regret being hasty. If there’s another way you should seriously consider it.
The OP isn’t fixing up his home - he needs money for his child’s medical care.
Another thought just occurred to me. I’m guessing that you’ve exceeded your insurance coverage for your child. Are there any state or local programs you can tap for financial assistance? I used to work with someone who got some help covering his son’s medical bills that way, but I’m sorry I don’t remember the details. If your child’s been hospitalized at some point, maybe a social worker at the hospital can help you research the possibilities.
My mistake, but the fact remains that this is a terrible time to sell a house, especially if you already have money problems. Waiting could preserve some of the equity that will be lost if you sell in a soft market. Many buyers are delighted to find a seller in difficulty and they’ll have little or no sympathy for your plight.
Well, it sounds like I will be talking to my credit unions branch manager this morning!
This is a bad time to sell a home. Fortunately, we’re in a desirable neighborhood. I’m hoping that this will be a good time for me to swap houses since I will be moving to an outlying area in a more competitive market. In any case, the divorce has called the question. I need to move.
A four-year-old unpaid charge-off will still be showing on your wife’s credit record, and it will still be having an impact on her score. If there is a judgment listed, that will hurt considerably as well. The laws on how long various negative items are reported on your credit report depend on the state in which you live, so it’s possible that she could be stuck with those items showing for a few years yet.
Since you want to move on the HELOC right now, there isn’t really time to try to spruce up other aspects of her (or even your) credit report(s) to try to mitigate the effects of that default. Your credit union branch manager is likely to be more understanding than the loan officer of a major bank would be, though, given the current tight credit environment.
I would definitely hunt for any public funding to help mitigate your medical expenses, if you haven’t already. Best of luck to you and your family.
The OP isn’t fixing up his home - he needs money for his child’s medical care.