Thank you to John Trenton from Refinance Mortgage Rates for this guest post. Unfortunately, this is a situation our clients face from time to time. It is a good reminder that for homeowners facing divorce, there are many challenges but also options. Both your lender and your real estate agent can help you sort through those options.
Buying a home after a divorce presents special challenges, but with some attention to detail it is possible to overcome these situations and acquire the right home for the next phase of life.
Divorce can leave both spouses in difficult financial circumstances, but they each still need places to live. For many, that means buying a home. Often, however, divorced couples are left with a remaining mortgage on their joint home that neither of them knows how to effectively manage.
Home Mortgage Refinance for the Old Home
Before either party can consider a new home, it is important to deal with the mortgage on the former home. While selling the property and splitting any proceeds is often the most logical way to go, that is not always possible.
In cases where one partner wants to keep the home, it is essential for the other party to make sure his or her name is removed from all paperwork to limit liability and protect the individual's credit history in case of default by the other spouse.
A home mortgage refinance is often the best course of action if the joint home is not being sold. The party who wants to keep the home may not automatically qualify for refinancing, however. Proof of income and other paperwork is usually still required, and this can be difficult to provide after a division of assets.
Since the original lender is under no obligation to help with a home mortgage refinance, many find solutions from other lenders.
Considerations for the New Home
Financial experts recommend that newly divorced homebuyers get a letter of approval from a lender before going to see new homes to prove to real estate agents that they have adequate resources to make a purchase.
Before looking at any property, they should also carefully consider what size monthly payment is comfortable for them and how large a home they can reasonably afford in their new financial circumstances.
While it can be difficult to get a new home loan after divorce, some lenders approve clients for larger mortgages than they can handle. It is important for the recently divorced who are considering homeownership to take into consideration the costs involved in upgrading the new home as well as other difficult-to-predict costs that impact the monthly budget like transportation to and from the new neighborhood.
Couples with joint custody of children must consider their proximity to each other when choosing a home location and must make sure both homes have enough room for the children to stay over.
It is also important for divorced people to consider how their social lives will develop after a divorce. A suburban home can seem lonely to those living without a partner, but a downtown condo could be just the thing to spur a new lease on life.
While buying a home after a divorce can be challenging, it is also an important step toward normality for those whose lives have been in upheaval for months or years.