Is Buying a Home After a Divorce the Right Decision for You?
Divorce is never a walk in the park. And when it’s all over, at least one of you will need a new place to live.
While you were separated, you may have rented a home, or split time in your marital home to minimize disruption for your children. One of you may have even moved back in with Mom and Dad, or an understanding friend. Once everything’s official, you’ll probably want to find a more permanent option, and get settled as soon as possible so you can get back to normal.
As you decide where you want to land, there are a few things to consider.
Should you buy a house before the divorce is final? Probably not, unless you’re sure you know where you want to live and you’re paying cash. If you do apply for a mortgage, you may risk being denied, since what you’ll have after your divorce isn’t guaranteed. There may be too many variables for a lender to make a decision.
Does alimony, spousal support, or child support count as income when I apply for a mortgage? It can, but you will probably need to show that it’s been paid consistently for a certain time before it will factor into your debt to income ratio. (We’ve all heard the horror stories about ex-spouses who just don’t pay. So has your mortgage lender.)
Should I rent or own? Though a divorce itself doesn’t lower your credit score, the process may have. If you and your ex were too stressed out, you may have made late payments, or you may be struggling to make ends meet now that you’re living in two separate households. If a lower than normal credit score or debt to income ratio prevent you from getting favorable terms on your mortgage, consider renting until you can qualify for a better rate. You also might not be ready to commit to owning a home, since you can’t always anticipate how you’ll feel about living in a certain place after your divorce.
If my spouse and I were both on the mortgage, and my spouse is keeping the house, can I be removed from the mortgage? The only way to remove a borrower from the mortgage is to have the other borrower refinance the full amount on their own. And that’s only possible if they qualify on their own. Depending on what your divorce decree requires, you may have to stay on the mortgage. And if rates are much higher than when you originated the loan, the two of you may decide that keeping the mortgage as it is would be best, as long as you can both agree who will pay it, and how it will be paid.
Read more → What Happens to the Mortgage After a Divorce?
Can I have my spouse removed from the deed of our home? As long as they are willing to be removed or it was required by your divorce decree, your spouse can sign a quitclaim deed ceding ownership of the home to you.
Should I downsize? That’s up to you. If possible, give yourself time to think about it before you make a final decision. Though it may seem like you want a smaller space, you might find you still need the space. Now that you’re on your own, you may want to start having people over again. (Real talk: Unhappy marriages usually make for unhappy people. You might be a lot more fun, and a lot better at entertaining, than you thought! Besides, guests love it when they aren't hosted by two people who keep making passive aggressive comments across the dinner table all night.) If you do downsize, think about which spaces you use most in your current house and which ones are underused and possibly unnecessary in a new home.
You may want to refinance. Do you qualify? As we mentioned above, the only way to get someone’s name removed from a mortgage is for the remaining borrower to refinance on their own. You may not qualify for the current mortgage, but you have options. Let’s say you have 10 years remaining on a 30-year mortgage and a balance of $46,000. If you refinance to a 15 year, fixed rate mortgage, and the interest rate is the same or better than the original loan, your payment will be smaller and you may qualify. If you have cash, you could also pay down the mortgage before refinancing, or your spouse might be required to make a lump sum payment to increase equity in the home. Use our mortgage calculators to run some numbers and explore your options. Veteran? Check out our comprehensive guide on refinancing for folks in your unique situation here.
However you do it, try to get settled in -- or have the details finalized if you’re staying put -- as soon as possible, so you can start your new life. Even if your new home isn’t where you plan to stay forever, you’ll want to feel at home there and give yourself time to heal.