What Do I Need to Know About Buying a House After a Divorce?

One of the most significant steps you can take after a separation or divorce is to find a new home. It signifies a new beginning and allows you to start fresh and create a more stable and stress-free home life. However, while you may be anxious to get settled in a new house, there are several factors that you will need to consider before committing yourself to a new mortgage, including your current credit score and how the marital property was distributed. Depending on the outcome of your divorce settlement, you may be limited in terms of what you can afford, particularly if you are responsible for alimony and child support payments. A skilled divorce lawyer will address your questions and concerns and ensure that you are in the best financial position to purchase a new home.

What Factors Do I Need to Consider Before Buying a New House?

Whether you are in the process of getting divorced, or you have reached a final divorce agreement, you know that the process can be complicated and expensive. If you are thinking about buying a house, it is important that you understand that this is a significant financial investment, so you will need to consider your options and ensure that you can afford the mortgage, the real estate taxes and the other costs associated with owning a home. The following are examples of important things to consider before purchasing a new home after a divorce:

  • Your income and assets. It is possible that you may qualify for a smaller loan amount that you did when you were still married, particularly if you are responsible for making alimony and child support payments. If your lender counts this as debt, it could impact your debt-to-income (DTI) ratio, which is the percentage of your gross monthly income that goes towards your total monthly debt. Ultimately, it is an indicator of your ability to manage your finances and pay back your loan. If you are going to be receiving alimony and child support, those payments can be factored into your earnings, which may increase the loan amount that you are qualified to receive. 
  • Credit. In order to qualify for most conventional loans, you will need a credit score of at least 620. In addition, you will need to establish a sufficient credit history. If you do not have sufficient credit history, apply for a credit card, and make sure that you make the monthly payments. If you take on additional debt, this can be counterproductive and prevent you from being approved for a mortgage. Establishing a credit history will help improve your credit score and increase the likelihood of qualifying for a mortgage.
  • Status of your current mortgage. If your name is still on the mortgage you have with your ex-spouse, you will need to request your lender to release you from the mortgage or have your ex-spouse refinance and remove your name from the loan. In most cases, these details are resolved during the divorce process when the marital property is distributed.

Can I Buy a New House if I Am Legally Separated?

It is certainly possible to purchase a new house while you are still legally married, but the process is a bit more complex, and there are additional documents that you will need to have available. The following are steps you should take if you do not want to wait to buy a new house until your divorce has been finalized:

  • Finalize your legal proceedings. If you are legally separated, your lender is going to ask for a copy of your legal separation agreement. In addition, if you have a property settlement agreement, you will need to provide a copy of that as well. This is a document that is signed by a judge and specifies who is responsible for what in the divorce. This will have a significant impact on your DTI.
  • Determine what you can afford. It is very important that you have a realistic idea of what you can afford based on your income and any ongoing payments that you are responsible for making, concluding alimony and child support payments. You will also need to consider the cost of a down payment, the monthly mortgage payments, taxes, and potential home improvements that will need to be made.
  • Divide your finances as soon as possible. Once the divorce is final, and the marital assets are distributed, you should take steps to separate your money at your earliest convenience so that you are not negatively impacted by any poor financial decisions that your ex-spouse makes.
  • Maintain a detailed payment history. Whether you are making child support or alimony payments, or you are receiving them, it is important to keep a record of the payment history. Lenders will review this information if you apply for a loan.
  • Get pre-approved. If you are seriously considering buying a new house as soon as your divorce is finalized, it is important to get pre-approved before you put in an offer on a house. When you are pre-approved your lender will verify your finances and credit score to be able to tell you how much you can afford to pay for a house.

What Tips Should I Keep in Mind When Buying a House After a Divorce?

The tips discussed above should be taken into consideration whether you are hoping to buy a new house while you are legally separated, or after the divorce has been finalized. However, the following considerations are particularly important after your divorce has been finalized:

  • Re-establishing credit. When you were married, you may have shared a joint bank account and joint credit card accounts with your spouse. When you divorce, and you no longer share those accounts, this can have a negative impact on your credit score. It is imperative that you establish a credit history if you plan to buy a house. There are several ways to do this, including opening a secured credit card, becoming an authorized user on another family member’s credit cards that you can reap the benefits of their good credit, or apply for a credit-builder loan which are personal loans secured by your own money and repay in installments. Over time, they can help demonstrate your creditworthiness.
  • Saving money. Getting a divorce can be an expensive endeavor. If you have other expenses piling up, it can be easy to fall behind on your bills and on your alimony and child support payments. Unfortunately, this will have a negative impact on your credit, so it is important that you take proactive steps to make all your payments on time and make every effort to save as much money as possible. One recommendation is to invest in a cash reserve and rebuild your bank accounts before purchasing a new house. In addition, create a monthly budget and identify areas where you can modify your spending habits.
  • Searching for a new location. Your financial situation may be significantly different as a single person than it was as a married couple bringing in two full-time salaries. When you are looking for a new house, come up with a list of things that you are looking for, including the property itself, how close it is to work, whether the kids will be able to continue to go to the same school, and whether it has easy access to amenities like shopping, restaurants, and grocery stores. Prioritize the list and consider what you might be willing to give up if cost becomes a factor. For example, if the house is close to schools, work, and shopping, but it has a smaller yard that you hoped for, it may be worth compromising.
  • Work with an experienced realtor. Going through a divorce is difficult enough without having to figure out how the real estate market works. An experienced real estate agent who has a thorough understanding of the housing market can assist you with every step of the process, including attending open houses, making a competitive offer, and navigating the closing process.

The Mendham Divorce Lawyers at Lyons & Associates, P.C. Represent Assist Clients with Purchasing a House After a Divorce

If you are facing legal complications related to buying a house, or you have questions or concerns about purchasing a home after a divorce, you are urged to contact the Mendham divorce lawyers at Lyons & Associates, P.C at your earliest convenience. To schedule a free, confidential consultation, call us today at 908-575-9777 or contact us online. Located in Somerville and Morristown, we serve clients throughout Somerset, Woodbridge, Morristown, Parsippany, Rockaway, Short Hills, Chatham, Randolph, Madison, and Morris Plains.