Moving on after a divorce may involve finding a new permanent living situation. If you are considering buying a new home and obtaining a mortgage, there are important factors to consider as you move forward with your life.
1. Complete Your Divorce
Before you make a move to buy a new home and apply for a mortgage, first make sure your divorce is finalized and has been formally issued by the court. Any home purchase you make before the divorce is final may complicate your financial award. Additionally, if you are still legally married, you may be required to obtain your spouse’s signature on any mortgage application which you certainly wish to avoid, not only to keep the home in your own name but also to keep your spouse from becoming involved in your decisions and affairs.
It is also important that your divorce is finalized so that your post-marital income, assets, and debts are clearly established, which will make it easier to apply for a mortgage if you need one, particularly if you are not the moneyed spouse.
2. Take Time to Consider Your Needs
While you may be in a hurry to move out of your marital home, this is not the time to make impetuous decisions about your living situation. If you need to move out quickly, find a rental, and then take your time locating the perfect home to purchase for your new life.
Consider the following when looking for a new home:
- Location. If you have children, it will make everyone’s lives easier if you live near your former spouse for visitation purposes. If you do not have children, this is the perfect opportunity to put space between yourself and your spouse by moving to a new neighborhood, city, state, or country. Consider what your new lifestyle requires in terms of location. You might want to live near a gym, in an area with many restaurants, or near your place of employment.
- Type of home. After a divorce, you have the opportunity to start with a clean slate. This might be the time to transition from living in the city to the coast or vice versa.
- Privacy. If you or your former spouse are well-known or in the public eye, seeking out a new home that offers privacy and security can be important.
- Your new lifestyle. Now that you’re single, your interests, activities, and needs may be completely different than they were as a married person. Perhaps you want to be able to swim, would like a yard for your children, or need a room for your musical instruments – take all of that into account when looking for a new home. This is yet another reason why it makes sense to take some time after the divorce to stay in a rental and fully consider your needs – your lifestyle may completely change after the divorce and you need time to experience that and determine exactly what your housing needs are.
3. Work with a Realtor
When looking for a new home to buy, you probably plan to work with a realtor, but you should seek out a realtor with experience working with divorced high net worth former spouses such as yourself. Not only will they be sensitive to your situation, but they may have access to pocket listings, homes that are for sale but are not posted on the MLS system yet, allowing you to make a private deal.
4. Create a Budget
It is important to work with an accountant or financial advisor to create a budget you can live with moving forward. It can be challenging to live within a budget if you are leaving a marriage where there was no budget, and you are not the moneyed spouse. However, it is essential to set yourself up for success by establishing clear financial boundaries, including the mortgage payment you can afford in your new life. Having a realistic idea of what you can afford before you begin to look at homes will help manage expectations and allow you to focus your energy on homes that are appropriate for you.
5. Consider Your Income
If you are not the moneyed spouse, you may have no income other than alimony and child support and possibly investment income. It is essential that you work with a financial professional who can evaluate your income, budget, and ability to qualify for a mortgage. There are options to consider if your income alone does not meet the requirement for the cost of the home you want to buy, such as co-signers.
6. Resolve Your Marital Home
If there is a mortgage on the marital home and that home was bought during the marriage, this will impact your ability to qualify for a new mortgage. It is not uncommon for the divorce court to order a couple to continue to co-own a home, particularly if the market is bad or if the home is upside down in terms of the mortgage and equity.
Additionally, the marital home may need to be sold or refinanced by the spouse remaining in the home. Until that happens, your name remains on the mortgage and increases your debt obligations, and may make you ineligible for financing if you choose to purchase a home for yourself. Waiting to buy until the marital home is sold or refinanced into your former spouse’s name will make you more eligible for a new mortgage on your own.
7. Check Your Credit Score
Regardless of the assets you have access to; your credit score directly impacts your ability to qualify for a new mortgage. It is not uncommon for a divorce to result in financial unrest, causing late payments, confusion over how money is managed, and which spouse is responsible for which bills.
Late payments and crossed wires can negatively impact your credit score. If you are not the moneyed spouse and absolutely must qualify for a mortgage to be able to buy the type of home you need, you should obtain your credit score. If it is under 620, you may not qualify for a mortgage. You can hire an attorney or accountant who can remediate your score by correcting and updating the information in your credit report.
Buying a new home is an exciting opportunity, but it is important to approach it armed with information and experts who can assist you.