If you’re going through or just went through a separation or divorce, you may be looking to buy a new house. There’scertainly a lot to consider during this time. You may need to make decisions about your family home, or perhaps you’re in the midst of divorce proceedings. Let’s walk through a checklist of items to complete when you buy a house after divorce.
7 Steps To Buying A House After A Divorce
During or after a divorce, it’s natural to want to move forward with your personal and financial life. The following are steps to take if you buy a house after your divorce or legal separation is finalized.
1. Finalize Your Legal Proceedings
First, your lender will require your legal separation agreement. Buying a home while legally married but separated is possible. But you’ll need some extra documentation. If you have a divorce settlement agreement, they’ll need that as well. This order, finalized and signed by a judge, tells your lender who’s responsible for what in the divorce.
2. Remove Yourself From The Mortgage Of The Marital Home
If the property is legally awarded to your ex, you should make sure you’re removed from the deed. Doing so formally relieves you of your legal responsibility for the property. You may be able to use a quitclaim deed to accomplish this.
3. Divide Your Finances
When a couple divorces, the court issues a divorce decree (also known as a judgment or order). It divides their money, debts and other marital assets by outlining what each person owns.
Separating your finances helps ensure your credit score accurately represents your financial situation. Failure to do this could impact your credit score, especially if your ex-spouse made poor financial decisions that could make it harder for you to get a home loan.
4. Figure Out How Much You Can Afford
It’s crucial to figure out your income and ongoing costs. They can impact whether you can make a down payment and afford a new mortgage payment every month. The decisions in the separation agreement can help or hurt you as you determine how much home you can afford.
You may need to pay attorney fees, child support, alimony or other costs. Alternatively, your former spouse may sendyou payments, adding to your monthly income. This can have a big impact on your qualifying debt-to-income ratio (DTI).
If you make payments to your ex, they’re included in your DTI. On the other hand, if you receive monthly payments, it can help your qualifying income. This affects the home loan amount you qualify for and how much you can afford in monthly payments.
Your DTI also includes any payments you’re responsible for on your family home or other property you owned before the divorce. If your spouse was awarded the property, your lender can exclude that payment from your DTI.
5. Get Preapproved For A Mortgage
Once you finalize your divorce, mortgage preapproval is the next step if you’re shopping for a home. Gettingpreapproved by lenders before putting an offer on a house or property is important. A preapproval shows sellers you can qualify for a home loan and that you aren’t in over your head financially.
With a preapproval, your lender verifies your finances and lets you know how much you can afford to pay for a house.
6. Find The Right Real Estate Agent
When you purchase a home, it’s paramount to find the right real estate agent. It’s especially important to find the right agent after a separation or divorce. Some agents specialize in working with people going through a divorce or dealing with its aftermath.
The right professional can help guide you through any complications or sensitive situations. They’ll be familiar with any financial or legal issues that may arise during the home buying process. And, they’ll know the best way to tackle these issues so you can get approved for a mortgage.
7. Get Ready To Close
Once you have your finances settled and an idea of how much you can afford, you can start looking for a new home. Your agent should know how the asking prices of similar homes on the market compare to each other. When you find the right house at the right price, your next step is to put in an offer. If your offer is accepted, you can get ready for the closing process.
To close on the sale, you need to provide the income and expense information you prepared before. You and your agent can work together to ensure you have all the required documents in order. They can also help you work through including any contingencies if needed.
See What You Qualify For
Buy A Home
Discover mortgage options that fit your unique financial needs.
Refinance
Refinance your mortgage to have more money for what matters.
Tap Into Equity
Use your home’s equity and unlock cash to achieve your goals.
What Should You Consider When Buying A House After A Divorce Is Finalized?
A few special considerations may be worth taking into account after your divorce. Let’s see if any of the following apply to you.
Reestablishing Credit
You should consider how a separation or divorce affects your credit history. If you have joint credit card accounts, you’ll need to cancel those cards when you finalize your divorce. As a result, your credit score can take a huge hit – even to the point that you’re practically starting from square one.
You can work to reestablish your credit by getting a new credit card or two. You could also pursue options like taking out a small loan in your name only. Rebuilding your credit after a divorce is key so you can improve your odds of mortgage loan approval.
Keep in mind, rebuilding your credit won’t happen overnight. But if you monitor your credit and make your payments on time, your score will improve over time.
Saving Money
A divorce is expensive. It can be easy to fall behind on bills, which can negatively impact your credit. As you juggleexpenses like divorce attorney fees, keep your financial future in mind.
With divorces, we recommend building in a cash reserve to offset the many costs involved. Lenders want to see that you have a cash reserve, so it’s important to pad your bank account before you buy a new house.
Handling Your Current Mortgage
Divorces aren’t one-size-fits-all and not all divorcing couples follow the same process. Depending on your situation, you or your spouse may decide to stay in the home where you lived together.
If you and your former spouse were co-borrowers on a home loan that still has a balance, you have a few options. Acash-out refinance is one way to stop sharing mortgage responsibilities. Another common solution is a mortgage assumption, where one party takes over the loan.
No matter the situation, mortgage lenders look at factors like your DTI when you refinance or buy a house. So if you want to purchase a home after a divorce, you’ll need a plan for your current mortgage. If you’re unsure of your options, consult a real estate attorney to guarantee a smoother process.
Resolving your current mortgage obligations will make life easier for all parties involved. It can be complicated, but it can also free you up to find a new home for the next chapter of homeownership.
Searching For A New Location
If you aren’t staying in your family home, you may need to search for a new neighborhood. Maybe your DTI or credit score significantly changed after the divorce. Or perhaps instead of two incomes, your household will now only have one.Any of these scenarios might mean you need to downsize or relocate.
Identifying your ideal living situation is key to finding the right neighborhood. Factors that could convince you to live in one area over another include:
- Location of school districts
- Proximity to work
- Access to amenities
- Affordability
The Bottom Line
Buying a home can be stressful. And doing so while going through a divorce or legal separation can make it even more challenging. Keep the information discussed in this guide in mind to help make the process as smooth as possible.
Whether you’re refinancing your family home or buying a new one for your life’s next chapter, you have options.
Miranda Crace
Miranda Crace is a Staff Writer for Rocket Companies, bringing a wealth of knowledge about mortgages, personal finance, real estate and personal loans for over 10 years. Miranda is dedicated to advancing financial literacy and empowering individuals to achieve their financial and homeownership goals. She graduated from Wayne State University, where she studied PR writing, film production and film editing. In her spare time, Miranda enjoys traveling, actively engages in the entrepreneurial community, and savors a perfectly brewed cup of coffee.
