Ending a marriage is never easy. There are a ton of details to sort out, and if you and your ex can’t get on the same page, the battle can get ugly. Even if you meet somewhere in the middle regarding custody or financial support, you have to mentally prepare for life on your own. And in many cases, this involves getting a place that’s all yours.
It might come as no surprise that a divorce can wreak havoc on your personal finances. However, despite what’s happening, you may decide to take the plunge and purchase a home under your own name. Unfortunately, this move is easier said than done. If you and your ex owned a house while married, the loan was probably based on both of your incomes. Now that it’s just you, you have to qualify on your own merit. It’s not impossible to buy a home alone, but it might be challenging. Here are four tips for purchasing a home under your own name.
1. Decide whether you’re ready to buy
Before applying for a home loan, take a close look at your situation and determine whether now’s the right time to buy.
Several factors play a role in mortgage approvals. For example, if you didn’t work while married, or if you only worked part-time, you might be getting back into the workforce full-time. Even if you’re currently employed and earn enough to qualify for a mortgage, a lender may not approve your application right away. Typically, mortgage lenders want to see two years of steady employment, preferably with the same company, and your income must remain the same or increase during this 24 month period. If you’re just getting back to work, you may have to rent a place for now, and revisit buying at a later time
2. Protect your credit
Your credit score might take a hit while going through a divorce. A divorce in itself doesn’t hurt your credit, but with everything going on, you and your spouse might overlook bills. Credit cards and loans might go unpaid, and this can result in late fees. Once bills are 30 days past due, creditors can report delinquencies to the credit bureaus, which lowers your personal FICO score. If you’re planning to buy a home after your divorce, you’ll need to protect your credit score.
If you and your ex have joint credit card accounts, pay off and close these accounts. And if you have joint auto loans, consider selling these vehicles to pay off joint loans, or one person can refinance the car loan in their name and remove the other person’s name from the title. Also, sign up for credit monitoring services, and order your credit report periodically to make sure it’s free of negative activity.
3. Save any cash you have
If you’re thinking about buying a home after a divorce, you’ll need a cash reserve. Unfortunately, divorce proceedings can be costly. For that matter, you might have to hold off purchasing until you rebuild your savings account. If you and your ex sold a home, use cash from the proceeds as down payment on your next place. As part of the divorce, a judge may order that you sell assets and divide the proceeds.
4. Get pre-approved
Even if you think you meet the qualifications for a mortgage loan, a bank may think otherwise. So, before you start looking at homes and submitting bids, contact the bank to get pre-approved. It might be best to wait until the divorce is final to proceed with a home purchase. This way, you’ll have a clearer picture of where you stand financially, especially if you’re owed alimony or child support. With a pre-approval, a mortgage lender looks at your credit, your income and your cash reserve to determine if you’re eligible for a home loan, and how much you can receive.
Buying a new place after a divorce can provide a fresh start, but you shouldn’t jump into a purchase too soon. Sometimes, it’s best to wait a few years—just to make sure you’re financially prepared.