Divorce & Homeownership: Insights From Karla Kyte, CDLP

Karla: Honestly, I believe that anyone who is a homeowner or hopes to become one after a divorce should have a CDLP as part of their divorce team. We collaborate with attorneys or mediators to ensure that the terms agreed upon in the settlement can be executed once the final decree is issued. The key benefit is that it helps clients avoid the time and expense of post-decree modifications or the financial setback of being unable to achieve homeownership.

I often hear from clients after their divorce saying, ‘Why didn’t my attorney tell me this? How come they didn’t know?’ My response is always the same—’ Because your attorney is not a lender.’ It is not their role to know the intricacies of mortgage financing, nor should it be.

This week, I have taught three continuing education classes for realtors, and it has been fascinating to hear their perceptions of attorneys. Many assume that because attorneys lead the divorce process, they must know everything.

I see the attorney as the head coach of the divorce team. While they play a crucial leadership role, they are not responsible for handling every aspect themselves, just like a good head coach delegates to specialists. That is an important distinction to understand. Attorneys do not claim to know everything, but there is often a misconception that they should.

Karla: One of the biggest challenges I see is individuals agreeing to financial terms, such as assuming or refinancing a mortgage, without realizing they do not qualify. They often do not understand why until it is too late.

The main issue is that lenders calculate income very differently from how it is assessed during a divorce for purposes like spousal support or maintenance. If someone has a straightforward W-2 salary, the calculation is relatively simple. However, when factors like commissions, bonuses, differential pay, self-employment income, or part-time work come into play, the process becomes much more complex. Lenders rely on strict Fannie Mae guidelines and tax returns, pulling multiple data points to determine qualifying income. For example, if someone is self-employed or recently received a large bonus or commission, that income may not even be considered until the following year when it is reflected in their tax filings.

Karla: Absolutely. That is another major issue. I am part of several divorce groups on social media, and I see a lot of advice being shared. I do not even comment anymore, but my name comes up often. The biggest problem is that many people turn to social media, family, or friends for guidance, relying on advice from others who have gone through a divorce.

But no two divorces are the same. Each case is incredibly unique, just as no two people are exactly alike. Offering generalized advice in those settings can be misleading and even harmful. It is unfair for someone to compare their situation to another’s because so many different factors can influence a divorce. What applies in one case may not apply at all in another.

Beyond that, these discussions can stir up emotions, making an already difficult situation even more overwhelming. That is another reason why relying on social media or anecdotal advice can do more harm than good.

Karla: It is interesting because I have built a strong book of business and have great client retention, so many of the people I work with are past clients. I have known them before, during, and after their divorce when they return for a refinance or a new home purchase. What stands out is how much their voice changes over time—you can often hear the emotional shift just in their tone. The process is deeply emotional.

I understand this firsthand, having gone through my own divorce. I empathize with my clients, but I also recognize that my role as a CDLP is to keep them focused on their financial future. My priority is helping them navigate homeownership with realistic expectations because it is a critical piece of their transition.

Many of my consultations do not end on a happy note—sometimes, they end in tears. But what I provide is clarity. Instead of lying awake at night, stressing over how to make things work, they leave with real numbers and a clear understanding of their options. That shift allows them to make informed decisions, even if those decisions are difficult.

A common example I see is a client—often a woman—who is determined to keep the family home. At the outset, they are completely set on staying, regardless of the cost. But once we break down the numbers, factoring in rising home values, increased interest rates, the cost of buying out a spouse’s equity, or even sacrificing retirement savings, they start to see the bigger picture. Many later realize that keeping the home is not the right decision for them.

Interestingly, I often hear from clients a year later saying, “I do not even know why I fought so hard to keep this house. It is not what I want anymore. I have a new partner, and I am ready for a fresh start.” That shift in perspective is so common.

I approach these conversations with patience, allowing clients time to process their emotions while keeping meetings structured and focused. I try to keep discussions concise and solution-driven, leaving them with action items to work through between calls. I also steer clear of discussing the personal details of the divorce itself because, ultimately, those do not impact the mortgage. My goal is to keep them on track, helping them move forward in the best way possible.

I am not a therapist or a friend in this process, nor am I equipped to take on that role—and I do not try to. My purpose in a divorce is clear: to help my clients maintain homeownership. That is my sole focus. Whether they are keeping their current home or buying a new one, ensuring they have a stable path to homeownership is what matters most to me. I have experienced firsthand the impact it can have, having gone through my own divorce years ago, and I know how important it is. That is why I stay focused on guiding them through the financial realities and keeping them on track.

Karla: That is exactly what I do through my divorce mortgage planning service. I sit down with clients and walk them through their options. The first question we need to answer is: Is it financially feasible? Can one person afford to keep the marital home, or does it make more sense to sell it, split the proceeds, and move forward separately?

Lately, I see more and more cases where selling is the best option due to the sharp rise in home values. A couple may have originally purchased a home for $600,000 or $700,000, and now it is worth over a million. In those situations, buying out the other spouse often becomes unrealistic—the financial burden is simply too great. Selling the home, dividing the proceeds, and possibly moving to a different neighborhood is often the most practical and sustainable solution.

That said, every case is different. If a client is determined to keep the home, I do everything I can to explore ways to make it work. But at the end of the day, the numbers are what they are. There is not much flexibility when it comes to mortgage qualifications and financial realities, which, in a way, can be helpful—it provides clear, concrete guidance on what is actually possible.

Karla: Exactly. When I present them with a scenario like, “Yes, you can keep the home, but it will leave you so financially stretched that vacations are out of the question, and you will struggle to afford your kids’ extracurricular activities,” that is when reality starts to sink in. Once they see the numbers laid out clearly, they often realize, “I love my home, but this just does not make sense.”

I think that perspective helps them when considering “What is truly best for my kids?” Keeping them in the family home might seem ideal at first, but if it comes at the cost of financial stability—meaning no vacations, no extracurricular activities, and constant financial stress—then it may not be the best choice.

That is why I focus on laying out all the options clearly. We start by determining what is financially possible, and from there, we work backward to help them decide what truly makes the most sense for their situation and their family’s future.

Karla: There are a few different options available in this situation, and one important consideration is assumable loans. Many homeowners do not realize that while most mortgages, especially those backed by Fannie Mae or Freddie Mac, state they are not assumable, there is a clause that allows for a release of liability in the case of divorce.

One of the biggest issues is that many people check their closing disclosure, see that their loan is listed as “not assumable,” and assume they have no options. Others may even call their loan servicer and ask, “Is my loan assumable?” Typically, the servicer will check the system and respond, “No,” simply because it is a Fannie Mae or Freddie Mac loan. However, what they fail to mention is that they are going through a divorce. I have heard from attorneys I teach in CLE courses that some even advise their clients not to disclose their divorce, which only makes the situation more complicated. If you call your servicer without mentioning your divorce, you will likely be told “No.” However, if you disclose the divorce, you are far more likely to hear “Yes.”

If you still receive a “No,” I always recommend calling again—sometimes multiple times—until you reach someone who understands the release of liability clause. If needed, I even offer to assist with a three-way call to help navigate the process.

While an assumption is possible, you still have to qualify for the loan on your own. Many people assume that because they have been making mortgage payments independently, they should automatically be eligible to assume the loan. However, lenders follow strict Fannie Mae and Freddie Mac guidelines, and loans must meet specific underwriting requirements to remain sellable on the secondary market.

Unlike a traditional refinance or home purchase, loan assumptions do not involve a loan officer advocating for you. Instead, you are dealing directly with the investor—you submit paperwork, an underwriter reviews it, and you receive a simple “yes” or “no” decision. Many people are denied assumptions not because they do not qualify, but because they do not know how to present their financials properly. This is why I assist with this process as part of my divorce mortgage planning services.

For clients who easily qualify, I let them know they may not need my help. However, many still choose to hire me because they do not want to handle the paperwork themselves.

Another challenge with assumptions is that they do not address the equity buyout. Even if a spouse assumes the mortgage, they still need to compensate the other spouse for their share of the home’s equity. This can be done in several ways, such as taking out a home equity line of credit (HELOC) or trading other assets like retirement funds or spousal support adjustments. I work through these options with clients to determine the best approach.

There are cases where an assumption is simply not possible. For example, if both spouses are on the title but only one is on the mortgage, the lender may not allow the assumption. In these cases, refinancing is necessary.

If a refinance is required, there are two main types: a buyout refinance and a cash-out refinance. Most lenders are not familiar with buyout refinances—this is something a Certified Divorce Lending Professional (CDLP) specializes in.

The key difference is that with a cash-out refinance, you can only borrow up to 80% of the home’s value and will face higher fees and interest rates because it is categorized as a cash-out loan. With a buyout refinance, you can borrow up to 95% of the home’s value, if needed, and benefit from lower interest rates and fees. However, the only cash that can be withdrawn is the amount awarded to the ex-spouse in the divorce settlement—nothing more.

If a buyout refinance is the best option, we can strategically structure the settlement to maximize financial benefits. For example, if a client also needs to pay attorney fees or other debts, we can adjust the settlement so that those expenses are awarded to the ex-spouse, increasing their buyout amount. This way, everything can be included in one buyout refinance while still benefiting from the lower interest rates and fees.

I know this can feel overwhelming, but my goal is to help clients navigate these financial complexities so they are set up for a stable and successful future in homeownership.

Karla: Yes, I want to focus on this specific scenario because I see it often. Many divorcing couples with teenage children are especially concerned about maintaining stability for their kids. As someone who has already gone through that stage of parenting, I understand how challenging it can be, even when things go relatively smoothly.

Because of this, many parents decide to keep the marital home until their youngest child graduates from high school. For example, one spouse might agree to stay in the home for the next three and a half years to provide consistency for the children, with the plan to sell afterward. However, a major issue that often gets overlooked is capital gains tax.

As a married couple, there is a $500,000 exemption on capital gains. But as a single individual, that exemption drops to $250,000. There is a common misconception—something I see frequently in social media divorce groups—that if someone reinvests all the proceeds from the sale into a new home, they will not be subject to capital gains. Or some believe that simply because the property is their primary residence, they are exempt from capital gains altogether. That is not the case.

I am not a CPA, and I do not give tax advice, but this is where I strongly encourage my clients to consult with a tax professional. In these situations, one spouse is making a significant financial decision by agreeing to hold onto the home for the children’s stability, yet they may not realize the potential tax consequences. If the home appreciates over those three and a half years, they may owe a significant amount in capital gains taxes when they finally sell. This is something that both spouses should take into account, as it can impact how they divide assets fairly in the settlement.

Another common issue I see is when someone is determined to keep the home because of their current low interest rate. They may decide to assume the mortgage, which can be a great option, but I have seen people make extreme financial sacrifices—such as giving up their entire retirement savings—just to retain their share of the home’s equity. That is often not a wise financial decision.

People do not always realize how long it takes to rebuild retirement savings, and they may not fully consider what they are giving up in exchange for keeping the house. The same goes for large investment accounts—these accounts are actively growing and generating returns, and once they are gone, it takes time to rebuild that wealth. Holding onto a low interest rate should not be the sole factor driving their decision, yet I see people fixated on keeping their 2.5% rate at all costs.

That is why I believe financial decisions during a divorce should be looked at holistically. There is no one-size-fits-all approach, and blanket advice like “fight to assume your mortgage if you have a low rate” is not always in someone’s best interest. Every situation is different, and these factors should be carefully considered before making long-term financial commitments.

Karla: A big part of what I do during the divorce mortgage planning stage is evaluating how support payments—whether it is spousal maintenance or child support—will impact mortgage qualification for both the payer and the recipient. If support income is needed to qualify for a mortgage, there are strict guidelines that must be followed.

For conventional loans, the general requirement is that the recipient must show six months of consistent receipt and that the support must continue for at least three years after closing. Different loan types, such as FHA, VA, and Jumbo loans, have their own guidelines, and there are also non-QM loan products that may allow support income to count after just one or two months of payments.

Many people assume they can immediately qualify for a mortgage once their divorce is finalized, but that is not always the case. I often get calls from clients saying, “My divorce is final next week, so I am ready to start looking for a new home!” But when I ask if they have received any support payments, the answer is often, “No, not yet.” That is when we need to pause and determine if they will even qualify based on their income sources.

This can be particularly frustrating for individuals receiving large amounts of support—$25,000 or $30,000 a month, for example—who assume they can easily afford a $5,000 or $6,000 mortgage payment. While that seems like simple math, lenders require proof of consistent payments before counting that income toward loan qualification.

Another challenge arises when maintenance is awarded for a limited period. If, for example, maintenance is only set for four years, that means there is only a six-month window in which the recipient can close on a mortgage, after six months of payments have been received but before the remaining term drops below three years. In cases like this, we may restructure the support by spreading payments out over a longer period rather than increasing the monthly amount, ensuring that it meets loan qualification requirements without increasing the payer’s financial obligation.

For the payer, support obligations also impact mortgage qualification, but there are strategies to help. Rather than treating maintenance as a debt that increases their debt-to-income (DTI) ratio, Fannie Mae allows maintenance payments to be deducted from income instead, which can make qualifying for a mortgage much easier.

Child support follows different rules. If a child is over 16, child support typically ages out at 19 unless stated otherwise in the separation agreement. If a client relies on child support for mortgage qualification and their child will turn 16 before the mortgage process is complete, we might adjust the payment schedule in the agreement, extending payments by a few extra months, so that it can still be counted as income. Otherwise, it may not qualify at all.

This is why strategic planning is so important when support income is a key factor in mortgage qualification. Understanding these details in advance helps ensure that clients are set up for success when securing a home after divorce.

Karla: I see a lot of mistakes in this process. One of the biggest issues is that separation agreements or memorandums of understanding (MOUs) are often written incorrectly. Many people choose to go pro se, meaning they represent themselves without legal counsel, and they try to figure everything out on their own. I work with a lot of these clients, as I receive referrals from realtors and social media. Unfortunately, going pro se is often a major mistake because they make agreements they later regret, especially when those agreements impact their financial future.

One of the biggest financial issues I see is improperly allocated support or debt. In many cases, support could have been structured differently to improve a client’s ability to qualify for a mortgage. This is especially problematic when clients do not fully understand how lenders view support income.

Another common mistake is assuming they must wait until the divorce is finalized to purchase a new home. In reality, when a couple is amicable, we can often help them purchase a new home before the final decree is issued. Many people do not realize this is an option, and it can be a costly oversight.

One issue I often see—especially with amicable couples—is not following the court order exactly when it comes to support payments. Even when both parties get along well, deviating from the court order can create significant problems. For example, I recently worked with a case where the husband was ordered to pay spousal maintenance of over $6,000 per month. Instead of paying the full amount directly to his ex-wife, he covered private school tuition and other expenses for their children and then deducted those amounts from his maintenance payments to her. While they had agreed to this arrangement, it did not follow the court order, which meant I could not initially count the support as qualifying income.

For lenders to recognize support income, it must be:

1. Court-ordered

2. Paid on time, every month

3. Paid in full from an individual account

In this case, since the full amount was not being deposited into the recipient’s account, we had to work with the underwriter to show proof of what he had been paying. The underwriter ultimately allowed us to count the income after he made one full payment directly to her, demonstrating his ability to pay. Ideally, though, he should have followed the court order from the beginning—paying her the full amount and allowing her to cover those expenses herself.

Another mistake I see frequently is keeping joint bank accounts open to transfer support payments. While this might seem convenient, it creates problems when verifying income for mortgage qualification. Support payments need to be made from one individual’s account to another, following the terms of the court order.

Ironically, these mistakes tend to happen most often with amicable couples who are trying to make things easy on each other. Their intentions are good, but by informally adjusting payments or using joint accounts, they unintentionally create complications that can delay or even prevent mortgage approval. Following the court order exactly as written is always the safest approach to avoid these issues.

Caroline: What steps can individuals take to protect their credit while going through the divorce process?

Karla: I do not encounter many credit issues in divorces today. Earlier in my career, it was more common, but I believe that was partly due to a lack of consumer awareness about credit at the time. Having been a lender for over 27 years, I remember always advising clients going through a divorce to be cautious because missed payments can severely damage credit, especially mortgage payments, which have the biggest impact.

Years ago, I saw more instances where one spouse would neglect payments, either intentionally or simply due to a lack of understanding, which would negatively affect both parties. However, that is incredibly rare now. People are much more informed about credit and generally understand the importance of maintaining it, even during a difficult divorce.

Of course, there are still rare cases where one party is completely reckless, disregarding their financial well-being just to harm their ex. But in most situations, even when divorcing spouses cannot agree on much, they both recognize the importance of protecting their credit. Payments are being made on time, and maintaining good credit is typically a priority for both individuals. To be honest, it has not been a major issue in many years.

Karla: I would tell them to bring me into the process. Family lawyers should involve a Certified Divorce Lending Professional (CDLP) early on to help guide their clients through the financial aspects of homeownership during and after divorce. Doing so leads to better outcomes for their clients and prevents situations where a client later blames their attorney for being unable to refinance, assume the mortgage, or purchase a new home.

I hear this frustration all the time. I had one client who had gone through a three-year divorce process and was finally at the finish line, ready to move on. But when I informed her that she did not qualify for a mortgage, because she was a stay-at-home mom and had not yet received any support income, she was devastated. If temporary orders had been put in place earlier, she would have already met the required timeline to count support income. But since I was not involved from the start, that option was never considered.

In her frustration, she blamed her attorney, her mediator, and her realtor for not informing her about this. But the reality is, none of them are lenders—they are not expected to know these rules. However, from a client’s perspective, they rely on their attorney for everything in this process. This is why lawyers should not try to handle every aspect of a divorce alone. Bringing in the right experts, including a CDLP, ensures the financial pieces are handled properly from the beginning.

Aside from child-related matters, the home is often the most important financial asset in a divorce. Overlooking mortgage qualification and homeownership planning can lead to major setbacks, post-decree modifications, or financial hardship for the client. When a CDLP is not involved, it is almost always a missed opportunity to create a smoother, more informed process.

And as guidelines change, so do the rules. Even if an attorney is familiar with some of the basic requirements, such as the common rule that child support or maintenance must be received for six months and continue for three years, many are not aware of even that. But beyond those basics, there are countless nuances, exceptions, and updates to lending guidelines that make it nearly impossible for someone outside of the mortgage industry to keep up with all the details.

Expecting an attorney to store and recall all of this information on top of their legal expertise is unrealistic. That is why collaborating with a Certified Divorce Lending Professional (CDLP) is so important. It ensures that the financial aspects of divorce, particularly those related to mortgages and homeownership, are handled with up-to-date knowledge and precision.

Caroline: So, how do you personally work with attorneys to make sure that your clients get the best outcomes out of their cases?

Karla: An attorney can hire me directly and bill for my services, similar to how they might work with a Certified Divorce Financial Analyst (CDFA). However, in most cases, attorneys simply refer their clients to me, and the client hires me separately for assistance.

When I work with a client, I provide the attorney with a detailed report outlining the financial aspects of homeownership in the divorce. For example, I will calculate how much income Sully needs to keep the home, refinance it, and meet the settlement requirements. Or, if Sully needs to buy a new home, I will outline what is necessary to qualify and how the separation agreement should be structured to allow for a home purchase before the final decree is issued.

I collaborate directly with attorneys while being extremely mindful of professional boundaries. I make sure to stay in my lane and work alongside legal professionals to achieve the best possible outcome for the client. My role is to provide financial clarity and solutions, which ultimately benefit both the client and their attorney. There is no downside to what I do—it only helps ensure a smoother process and better results.

I recently spoke with a client who hired me and was so impressed with the level of support I provide that she said, “I can’t believe you do all of this for that price. You should triple your fee!” And that was coming directly from a consumer.

Karla: I would say, call me as early as possible. There is no reason to lose sleep over this or try to figure it all out on your own when I can help bring clarity right away. I may not be able to solve everything instantly, but I can at least provide guidance and give you a clear path forward so you can stop lying awake at night worrying about how to navigate this process.

The most common thing I hear from my clients is, “I wish I had called you sooner. I’ve spent months stressing over this when I didn’t have to.” Getting me involved early can make a huge difference in reducing stress and ensuring you make the best financial decisions from the start.