If you’ve recently been through a divorce, you’re likely considering life on the other side of the paperwork. Selling off acquisitions, finding a new place to live, and getting a fresh start on life are all parts of redefining what life looks like for you and your family.
Buying a House After Divorce
Building a New Home
As you navigate your way out of your former living situation, you may be thinking about what buying a house looks like after divorce. Whether you choose to buy out a partner, sell a home, or choose a new residence, you’re likely looking at some type of new mortgage. What does that look like for you? Read on to see what you need to know about buying a house on your own.
Income
If you were a two-income family before, losing your spouse’s income could mean that you qualify for a lower loan amount unless someone else is entering into a mortgage contract with you.
Child support payments and alimony can be factored into your income and used to qualify you for more money, provided that you can prove you’ll be receiving them for some time. If they are counted as a reduction of income, they can also help keep your debt-to-income ratio down, allowing you to qualify for more money as well.
Once you’ve calculated your net income, determine your budget for a new residence. Try to keep your debt-to-income ratio at less than 43 percent to keep lenders happy.
Assets
Navigating a divorce can be expensive. Everyone’s situation is unique, but it’s not uncommon to see cash reserves dwindle, particularly if you have to hire an attorney. Make sure that you can retain enough for down payment and escrow costs to keep mortgage terms more favorable, and work with your partner if possible to make sure these pieces are in place so that the two of you can move on.
Boosting Credit
Joint credit accounts held by you and your former spouse may not work in your favor at this time. On the other hand, if your credit is better than your spouse’s, you can feel good about taking out a loan solely in your name without the hindrance of a subpar credit score.
If you are the one that needs rebuilding, consider establishing a few months of good credit by taking out small credit cards. Using them and paying them off in full each month will begin to build a solid credit history that banks look for when determining who is mortgage material. Even three to four months of this activity can yield a significant difference in your credit score and your creditworthiness as perceived by lenders.
Releasing Old Liabilities
If you want to end your old mortgage, there are two ways to accomplish this. Most lenders will happily release a spouse from a mortgage when they are presented with proper documentation. Submitting a divorce decree and quitclaim deed to your lender will result in the removal of your name from the contract, putting the house in your ex-spouse’s name.
Another option you have is refinancing after the divorce is finalized. This process pays off the old contract, and your ex will be able to start a new mortgage in their name. As you refinance, you can expect to pay closing costs, so you and your ex-spouse should plan for that if this is the best choice for both of you. Regardless of how you choose to release old property, the fine details should be worked out in the divorce decree to make sure that both parties are represented.
Timing
While the prospect of cutting and running is preferable for many going through a painful divorce, this is not always the best option for couples who have to slog through the finer details of property division and other marital assets. In the case of children, much thought should go into the creation of two stable residences where children can be cared for so the issue of custody doesn’t further complicate your efforts to separate amicably.
It may not be the best time to consider property purchase right after a divorce. In cases where many of the minor details have yet to be worked out, it may be best for one partner to consider short-term rental of a home or an apartment while other legal matters are being sorted through. Recent statistics reveal that almost eighty percent of divorced couples have one or both spouses renting after a property sale to allow for recentering and re-evaluation of life after divorce. Taking the time to make a smart decision will reduce the likelihood of impulse buying, buying to “get away”, and other situations that you’ll find yourself regretting later.
Getting Through
Life after divorce can be difficult to navigate, but there are things to look forward to as you consider setting up a healthier lifestyle with the ones you love around you. Making smart, thoughtful decisions on purchasing and selling the property will yield better results in the long run than hastily rushing through the process. Enlist the help of a divorce professional to help you along the way, and look forward to a brighter future in the days ahead.