Four Provisions Worth Knowing Before the Agreement Is Signed
Program and regulatory figures verified October 10, 2026. Details change; confirm your scenario with us.
A short page for counsel. No pitch, no referral arrangement, just the four financing provisions that most often turn a signed agreement into a problem.
★★★ 1. The agreement must address the proceeds
Fannie Mae Selling Guide B2-1.3-02 conditions limited cash-out treatment of a buyout on a written agreement signed by all parties stating "the terms of the property transfer and the proposed disposition of the proceeds from the refinance transaction."
★★★ A judgment awarding the residence and dividing equity, without addressing where the refinance proceeds go, satisfies the first limb and not plainly the second. ★★ Where it surfaces is underwriting, after signature, when obtaining a further signature from the other party is hardest.
★★★ 2. Twelve months of joint ownership, to disbursement
The same provision requires the property to have been "jointly owned for at least 12 months preceding the disbursement date."
★★ Three points that matter to drafting: it runs to funding, not application; it is a title test, not marriage or occupancy; and falling short does not prevent the loan, it reclassifies it as cash-out. ★ Where the deed date is close, a closing window drafted a few weeks later can change the classification.
★★ 3. "Awarded" has a specific financing value
Selling Guide B2-1.3-03: "There is no waiting period if the lender documents that the borrower … was legally awarded the property (divorce, separation, or dissolution of a domestic partnership)", displacing the usual six-month on-title requirement. The guide also disapplies the twelve-month seasoning of the loan being paid off "when buying out a co-owner pursuant to a legal agreement."
★ So language that clearly awards the property does work that merely permitting a transfer may not.
★★★ 4. Section 63 preserves the Prop 13 basis
Rev. & Tax. Code § 63 excludes "any interspousal transfer" from change of ownership, naming (c) transfers under a property settlement or decree of dissolution and (d) termination of a coowner's interest between spouses.
★★★ The financing consequence: the assessed value is unchanged, so the property tax escrowed into the payment is unchanged, so the payment the retaining spouse must qualify for is materially lower than a market-value assumption would suggest. ★★ On a long-held home this frequently decides whether a buyout is financeable at all, and it is lost entirely if the parties sell instead.
★ Two more that affect capacity on both sides
- ★★ Support cuts both ways. Selling Guide B3-3.4-02 permits support as income only with a six-month receipt history and documented continuance of at least three years from application; Selling Guide B3-6-05 treats it as an obligation for the payor. The duration agreed therefore shapes both parties' borrowing capacity. ★★★ And: "Lump sum equalization payments are not considered a steady source of income."
- ★★ California has nine conforming limits. Above the county figure the agency provisions above do not apply. In the San Jose metro the typical home already exceeds the highest limit in the country. The map
★ What is usually most useful
A short conversation while terms are in draft, so the agreement is checked against the financing before signature rather than after. We are happy to say plainly whether a contemplated buyout figure is financeable on one income, including when it is not.
★★ What this page is not
- ★★ Not a referral arrangement. We make no attorney referrals, ask for none, and pay and receive nothing for introductions.
- ★★ Not legal guidance. We are a lender describing agency requirements and quoting a statute. Drafting is yours.
- ★ Not a guarantee. Agency requirements were read on 2026-10-10, change over time, and are subject to lender overlays.
Mike Certo, NMLS #260555 · Cornerstone First Mortgage, NMLS #173855 · (480) 296-6513 · mcerto@cfmtg.com.
Frequently asked questions
What do family law attorneys most often miss in a buyout settlement?
The requirement in Fannie Mae B2-1.3-02 that the written agreement signed by all parties state the proposed disposition of the proceeds from the refinance, not only the terms of the property transfer. A judgment that awards the residence and divides equity without addressing the refinance proceeds does not plainly satisfy that second limb, and it surfaces in underwriting after signature.Does a buyout settlement need to account for the 12-month rule?
Where the deed date is close, yes. Limited cash-out treatment requires the property to have been jointly owned at least 12 months preceding the disbursement date, so a closing window drafted a few weeks later can change the loan's classification. Falling short does not prevent the loan; it reclassifies it as cash-out.Does this lender pay for attorney referrals?
No. We make no attorney referrals, ask for none, and pay or receive nothing for introductions. This page is information about financing requirements.Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about mortgage financing during and after a divorce. Not a loan commitment, and not legal, tax or financial advice. Cornerstone First Mortgage is a lender; it is not a law firm, does not represent any party to a dissolution, does not make attorney referrals, and takes no position on how property should be divided. California property-division rules are set by the Family Code and applied by the courts; the reassessment exclusion in Revenue and Taxation Code section 63 is administered by county assessors. Agency requirements described here are Fannie Mae Selling Guide provisions current as of the date shown and are subject to change and to lender overlays. Housing market figures describe the twelve months to August 2026 and are not a forecast. All loans are subject to borrower, property and program qualification.