In the aftermath of a divorce many people look to find security both in their surroundings and with respect to their finances. Buying a home or condo can accomplish both of these things but there are many things that should be considered as you open this next chapter of your life.
In many relationships, the family home is one of the largest single assets a family may possess. Deciding what to do with this asset (selling, refinancing, staying or going) can be a long and arduous process. In many cases, what you do (or do not do) will also shape and play a large deciding factor on your next real estate purchase.
When you find yourself considering buying a home after a divorce there are many things to consider.
Here are the top ten things that should cross your mind when taking this next step:
1. Is your divorce or separation finalized, in process, or just beginning?
Where you are at in the divorce proceedings may have a huge impact on the timing or viability of your next purchase. In my experience most family law attorneys will wait until the final divorce decree has been made but if your lawyer, lender, and ex are open to a new purchase you may be able to get something accomplished during the proceedings. You must realize that most divorce proceedings will take between 6-12 months and in the state of Colorado the minimum “cooling off time” that courts want to see elapsed after the divorce has been filed is at least 90 days. Many will find renting, or (gasp) mutually inhabiting the family home during the divorce is a necessity while the divorce is being worked out.
2. Is your name still on the mortgage for the family home?
This is a big deal because it will affect a number of things. Your credit, your debt to income ratio, and a the type of loan you may qualify for moving forward may all be affected if you still have a large mortgage liability sitting out there. I hear from customers all the time that tell me the judge said that there ex is responsible for the payments of the home. Be that as it may be, if you are still on the mortgage, the bank, the credit bureaus, and other creditors moving forward will honor the original mortgage you signed when you bought the home. In many cases you may need to sell or have your ex refinance your name off of the home before you can move forward in purchasing. In all cases you want to make sure the payments are being made timely so your credit isn’t negatively affected.
3. What does your income look like? Are you collecting alimony or maintenance payments?
After a divorce or separation your, “family” income may be drastically affected. After the dust settles you will need to assess what your own income will look like moving forward. Most traditional lender will study your income with a fine tooth comb. In their eyes, income is the means by which they will be paid back. Unfortunately, if you have too little or no income on paper, buying a home may simply not be feasible until the income raises.
4. Do you have kids and are you now co-parenting with your ex?
Your kids and their school, extracurricular activities, and the logistics that go into all of these and more must be considered when buying a home after divorce. What does the logistics look like to get your kid(s) to and from all of their obligations? All of these things must be considered when looking for a place to live post-divorce.
5. Where do your kids go to school?
If you want to keep your kids in a specific school or ensure that they go to a certain school in the future this may be a large determinate of where your live. Most well trained agents can show you on a map the outlines of certain schools or districts in areas you are attracted to when looking for a home. Once a preferred area is identified have your agent set up a search that will only identify properties in these preferred school areas.
6. What are your assets?
After a divorce or separation it may be prudent to take stock of all or your assets and liabilities. Any cash assets or those that are not earmarked for retirement may be used for down payment funds on a new home. One must also consider that upon moving into a new home you may need to spend money on items such as appliances, lawn equipment, and or decorating items. Budgeting your funds and knowing what you have are huge if you plan to buy a home in the near future.
7. Do you have a real estate agent who you can trust that has dealt with customers in your situation?
Most people know a real estate agent or two but that doesn’t always mean that those acquaintances are the best suited for helping you after your divorce or separation. You will want to consider an agent’s professionalism, expertise, abilities, and tenure when vetting an agent best suited to help you. Many times your family law attorney will have recommendations on this front but make sure to ask your agent if they have dealt with individuals closing out similar chapters of their lives and/or taken classes to educate themselves on what to expect.
8. Have you talked to a lender who has dealt with customers in your situation?
Many of the considerations that apply to the real estate broker you choose can also go for a lender when shopping around after a divorce. You will want to choose a professional who has dealt with customers in similar situations and knows the nuances of ascertaining accurate income and assets of someone who is recently divorced.
9. Are you realistic about what you can afford and what your new housing may be?
Many times the home you will buy after a divorce may not be similar to the surroundings you have become accustomed to during the marriage. This is almost always the case where there are two income earners in the household. Realistic expectations of price range should be set as early as possible by consulting with your lender early in the process. Just as your marital status does not define you, do not fall into the trap of letting your house or its locale define who you are. If that has been the case, good news, you can redefine!
10. Should you just rent?
This may not be ideal, but in many cases renting is a necessity after a divorce. Many people do not have the means to buy properties with cash and if income is too low, or debt to high, to qualify; renting may be the only option until the income can justify purchasing. Get with your lender to figure out what is best in your situation.
If you are faced with the aftermath of a divorce, rest assured, it gets better. Consult a local Realtor who is an expert in helping people in similar situations and start looking for a great place to start the next chapter of your life.
Matthew Cobb, Broker Associate
Cobb Home Team