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Buying A Home If You’re Legally Separated Or Divorced

3-Minute Read
Published on October 8, 2019

Before setting out on your journey to purchase a new home after a separation or divorce, it’s important to save yourself some time and equip yourself with the proper information and documentation.

This post will go over the considerations and steps you need to take if you’re looking to buy a home while in the process of getting divorced or after getting your divorce finalized.

How To Buy A House While Getting Divorced

It’s natural to want to buy a place of your own as soon as possible and move forward with the next phase of your life after a divorce. Buying a home while legally married but separated from your former spouse is certainly possible, but there’s some extra documentation needed and things to be aware of.

First, your lender is going to require your legal separation agreement. If you have a property settlement agreement, they’ll need that as well. This order, finalized and signed by a judge, will tell your lender who’s responsible for what in the divorce. This is important because it can have a big impact on your qualifying debt-to-income ratio (DTI).

The decisions laid out in the agreement can help or hurt you in determining how much home you can afford. If you’re responsible for the payments on any existing property you might have owned before the divorce, that’s included in your DTI. Conversely, if your spouse was awarded the property, your lender can exclude that payment from your qualifying ratios. If the property is legally awarded to your ex, you should make sure you get removed from the deed in order to end your legal responsibility for the property. You may be able to use a quitclaim deed to accomplish this.

The contents of any child support or alimony agreements are also important. If you make payments to your ex, it’s included in your monthly debt. On the other hand, if you can show you receive monthly payments that are going to continue for some time, this can help your qualifying income.

If you’re already divorced, your lender will look for the same information, but it will be from your divorce decree instead of a separation agreement.

Considerations For Buying A Home During The Divorce Process

There are a few special considerations you might want to take into account if you live in a community property state or will be re-establishing credit after your divorce.

Community Property

One thing to note if you’re considering buying a house while separated is whether you live in a community property state. If you do, your spouse may have rights to any property you buy while you’re still married unless they explicitly sign away those rights.

Also important in community property situations is DTI. If you’re getting a government-backed loan (FHA, USDA, VA), your spouse’s debts are included in your DTI. However, their credit score isn’t counted against you for qualification purposes. This also doesn’t apply to conventional loans.

Depending on the situation, it could be much easier to wait until after the divorce if it makes sense and you have concerns about the other person’s credit.

Re-Establishing Credit

Another consideration needs to be your credit. If you’ve always had joint credit card accounts with your spouse, those go away when you finalize your divorce. Your credit score can take a huge hit and it’s a bit like starting over from square one.

Therefore, whether you’ve finalized your divorce or you’re going through one, you can work to re-establish your own credit by getting a credit card or two and doing things like taking out small loans in your name only.

Another thing to keep in mind if you’re in the process of getting a divorce: they’re expensive. It can be easy to get behind on all those bills, which can impact your credit as well. It’s important to keep your financial future in mind.

During the divorce process and as you re-establish credit on your own, it’s going to be important to make sure you’re monitoring your situation and doing the right things. Our friends at Rocket HQ offer a free service where you can get your VantageScore® 3.0 credit score and report every 2 weeks. You’ll also receive guidance based on your personal report outlining the things you can do to improve your score. 

If you’re looking for a place to start on your new solo credit journey, here’s something on rebuilding your credit. It won’t happen overnight, but it can be done. 

If you think you’re ready to get started with your mortgage process, check out Rocket Mortgage® by Quicken Loans®. Also, one of our Home Loan Experts would be happy to help if you give us a call at (800) 785-4788. If you have any questions, you can leave them for us in the comments below.

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