Saturday, 21 October 2017

Buying While Divorced: What You Need To Know To Move Forward

Written by Jaymi Naciri Posted On Wednesday, 01 February 2017 21:31

Ending your marriage introduces myriad changes to your life. And when it comes to buying a house, checking the "divorced" box could prove problematic. If you're newly single and looking to make a home purchase, a few tips can help you accomplish your goal as painlessly as possible.

Check your budget and check it again

Once you involve a lender in your homebuying plan, you'll get a preapproval (assuming you qualify) that provides you with the maximum amount you can spend on your home. But that doesn't mean you have to spend the maximum. You don't want to be house poor, and end up with a home of your own but no money left over after your monthly expenses to actually enjoy your life.

Take your pre-approval from your lender and do some serious math. Can you really afford that payment? Did you factor in the mortgage insurance and the HOA and the home warranty and the landscaping?

Now think about all the other expenses. Like when your kid needs new shoes and uniforms and private lessons for soccer. Or your air conditioner breaks. Or a storm wrecks your roof.

Have you also accounted for monthly savings? You'll still need a "rainy day" fund not to mention college funds for your children, and don't forget about retirement. Advice varies about how much a person should be able to put away, "But Harvard professor Elizabeth Warren recommends that you reserve 30 percent of your after-tax income for discretionary - or non-fixed - expenses and 20 percent for savings," said The Nest. "That leaves 50 percent of your after-tax income for fixed expenses."


Huffington Post

Consider what's really important

Moving down, if it's necessary because of changing financial realities, may not sound like a picnic, but overextending to stay in a certain neighborhood or buy a similarly sized house won't be either.

You have less purchasing power on one income, which can lower your options. Being realistic about what you can buy is important, but it may require you to have a serious talk with yourself. Making a list of must-haves, whether that means being in a certain school district, or within a certain distance from work, is a good first step.

Talk to multiple lenders

Connecting with a lender who understands both your life stage and financial outlook can help streamline the process and uncover loans and programs that are geared toward single buyers.

Single moms traditionally have a "harder time qualifying after (the) housing downturn," said My Mortgage Insider. Much off this has to do with the discrepancy in income, although women have largely been able to overcome that obstacle to more than double the number of single men buying homes this year, according to the National Association of Realtors (NAR) in its 2016 Buyer and Seller Survey. After dropping for several years, the number of single women buying homes rose to 17 percent last year, up from 15 percent in 2015.


Home Free USA

"Despite having a much lower income ($55,300) than single male buyers ($69,600), female buyers made up over double the amount of men (7 percent)," they said. "Single women for years have indicated a strong desire to own a home of their own, as well as an inclination to live closer to friends and family. With job growth holding steady and credit conditions becoming somewhat less stringent than in past years, the willingness and opportunity to buy is becoming more feasible for many single women."

Contacting your local housing authority can help determine if there are specific homeownership programs, grants and loans that are right for you. Down payment assistance programs in individual states, like Welcome Home Illinois, Maine's First Home Loan program, and Pinellas County, Florida's First-Time Homebuyer program are just a sliver of the available programs that could help give a single buyer the help they need.

Consider taking your name off the marital home's mortgage

This can work toward improving your credit worthiness because, "In the eyes of the mortgage lender, you remain married and liable for the mortgage unless you sell the house or refinance," said Bankrate.

It should be noted that how to deal with the marital home will undoubtedly be spelled out in your divorce decree, but if you've decided your ex will remain in the house and he or she has not yet refinanced to remove your name, that should be done before you apply for your loan. "A divorced person's credit rating is also highly impacted by still being part owner of the marital home and can lead to a divorced person not being able to qualify for a new mortgage loan for their own place due to the high level of overall debt load still showing up on their credit report," said Huffington Post.

Take your time

A newly divorced person might not be financially ready from a savings standpoint and may also still have other intermingled obligations like credit cards, investments, and even old debts that are hurting your credit score. "Besides, you may not be able to rush, even if you want to," said Katie Connell, a family law attorney with Boyd Collar Nolen & Tuggle in Atlanta on US News. "Some lenders won't even consider letting a divorced person who receives alimony use that alimony as evidence of income until there's a six-month history of alimony payments being paid on time."

If you were thinking about buying a house before the divorce is final, you might want to wait a bit. "Even if you can afford it, trying to buy a new home before a divorce is finalized can mean a red flag for lenders," said US News.

Check your emotional state

Buying a home is a huge undertaking, not just from a financial standpoint, but also from the perspective of maintenance, upkeep, and being the only owner, which means you're responsible should something go wrong.

While it can feel like the need to move and to have something of your own is urgent, you'll want to make sure you're not biting off more than you can chew - especially after the emotional turmoil you've probably just gone through in ending your marriage.

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