Should You Buy a Home After a Divorce?

Should You Buy a Home After a Divorce?

Going through a divorce isn’t an easy process, and once you’ve finalized, it’s natural to want to get your life back on track as quickly as possible. For many people that includes finding a new place to call home, but there is a lot to consider before you decide to buy.

Take a hard look at your finances—and your life—to find the best fit for you.

Should You Rent or Buy?

Both renting and buying have advantages and disadvantages, deciding which is right for your lifestyle may boil down to one simple fact: Flexibility. If you plan to stay at your current job or don’t want to take your kids out of school to move later on, buying a house may make sense.

On the other hand, “Maybe being able to rent and be committed for one year at a time is more appealing to a recent divorcee,” said Joe Spisak, sales manager for Inlanta Mortgage Inc.

To help answer this question, decide where you would like to see yourself in five years. If you would like to remarry or take a new job, you may have to sell your house a few years down the line, likely before you build up much equity. If you plan to stay in the same area, buying may make more sense.

Did Your Divorce Affect Your Credit History?

A divorce can affect your credit score, a big factor in whether you can qualify for a new mortgage.

“During the divorce process, many times bills go unpaid or are paid late,” Spisak said. And even a few late payments can drop your credit score significantly.

Just finalizing your divorce can also have an impact. When joint accounts with longstanding good histories are split between spouses each of their credit scores may be lowered, Spisak said.

To find out where you stand, order a copy of your credit reports and scores from the three major credit bureaus—Equifax, TransUnion and Experian.

What is Your Debt-to-Income Ratio?

Qualifying for a mortgage has changed since the recession. Today, the majority of loans are Qualified Mortgages, following a set of rules enacted by the Consumer Financial Protection Bureau. According to the CFPB, your monthly debt (including your mortgage) cannot exceed 43% of your monthly pretax income to qualify. Any lender you choose will take a hard look at your debt-to-income ratio before approving you.

“If you are responsible for paying alimony, maintenance or the like, depending on how long this is supposed to go on for, it can and likely will be counted as additional debt above what shows up on the perspective borrower’s credit report—thus having an impact on the ability to qualify,” Spisak said.

On the flip side, if you are due alimony or child support each month, you can use the payments to bolster your income levels. However, you will need proof of receipt for any support already paid, and proof that the support will continue for a certain length of time, such as three years, Spivak said.

Taking the Plunge

If you decide that buying a home makes sense to you, getting pre-approved for a mortgageshould be your first step. “You are likely obtaining a no cost look and useful information to purchase now or in the near future. There is no negative to having this knowledge,” Spisak said.

Your next step should be locating a qualified REALTOR® who can help you find an affordable home and guide you through the rest of the home-buying process.