Post-Divorce: Are You Ready to Buy a Home?
Whether the divorce is in the works or has already been finalized, you are now a single woman. What’s all that freedom without a place to call home? Perhaps you moved back home for a bit, or are renting an apartment, but the thought of becoming a homeowner is weighing on your mind. Here are a few tips to determine if you are ready to venture into homeownership.
First Off, Get Your Stuff
This might sound like a no brainer, but in the all the hustle and bustle of attorneys, judges, and divorce paperwork, you completely forgot to retrieve your things, including personal items and furniture. More than likely, you laid out how your marital property would be divided in the proceeding. However, regardless of how amicable the divorce was, it’s a good idea to take someone with you to pick up your things and avoid an awkward or upsetting encounter. If you have several large, heavy items, consider hiring a mover to speed up the process so you can move on from this chapter of your life as quickly as possible. Before you take off, double check that you didn’t forget anything to avoid having to make another trip and face the many memories your old home is sure to hold.
Crunch Some Numbers
Once you’ve got all your belongings in tow, it’s time to address your financial situation. Take a look at your post-divorce income as well as your debt, as this can greatly impact your ability to get a mortgage. Most loans are Qualified Mortgages that follow rules set forth by the Consumer Financial Protection Bureau (CFPB), which states that your monthly debt, which includes your mortgage, must not exceed 43 percent of your monthly pre-tax income. Keep in mind that if you are receiving child support or alimony, this will count toward your monthly income and can improve your chances of qualifying. However, you will need proof of receipt for any payments received prior to applying, and lenders often require a proof of payment over a period of time to ensure that the payments will continue.
Don’t forget to check out your credit score too. The last time you checked you were in good standing. While the divorce itself won’t impact your score, the aftermath could. For example, losing that second source of income could cause financial strain, leading to missed payments and bills. In addition, your credit could take a hit if payments on joint accounts aren’t made. Even if the joint account has an excellent credit history, once it is split between the two of you, both of your scores could decrease. To avoid an unintentional decline, create a new budget based on your sole income, stay on top of payments by setting reminders, and make sure all joint accounts and debts are addressed.
Watch Your Budget
One of the biggest tips for any single, female home buyer is to watch your budget. The lender may approve you for a loan that eats up a third of your gross income but you have other factors at play. For example, if your annual income is $50,500 with a 10 percent down payment on a $149,000 house and a loan at 5.375 percent for the remainder, the monthly payment will be $750. However, this fails to take into account other expenses such as property taxes, private mortgage insurance, home insurance, maintenance, and repairs. Pair this with your other monthly expenses and you could be way over your head. Get the best deal by shopping around with several mortgage lenders, and have a loan officer give you an unbiased opinion.
Buying a home post-divorce is sure to give you a great sense of freedom and independence, but make sure you are truly ready first before you get in too deep. Take a look at your financials, including your budget, to make a well-informed decision.
Ms. Fisher has spent over twenty years as a CPA, and is currently working on a book about financial literacy (due out in 2018). She also runs http://financiallywell.info/