Buying a home while getting divorced is possible, but you might need the cooperation of your spouse. A lot depends on your finances, the laws in the state where you're getting divorced, and where you are in the process.
While it might not be an ideal time to buy a home, you still need a place to live. If you're used to living in a home you own, you may want to buy another home right away. Learn more about the process to reduce the legal headaches and increase your chances of success.
What Is a Quitclaim Deed or Interspousal Transfer Deed?
One of the hardest parts of getting divorced is splitting your assets. This is especially true if you owned a home together. Depending on state law, whether you lived in the home together, and other factors, you may need your soon-to-be former spouse to sign a quitclaim deed or interspousal transfer deed. These documents state that your spouse is giving up their claim to the property.
What Is a Quitclaim Deed?
Title companies in community property states will require your spouse to sign and notarize a quitclaim deed. This document says that your spouse disavows any acquired interest in your home or transfers it to you.
As of 2021, community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. But, even non-community property state laws might consider the purchase of a new home a marital asset while the buyer is in the midst of a divorce.
Many people mistakenly believe that the person who moves out of the property gives up their claim. Most of the time, this is not true. Even if a spouse moves out prior to the divorce, they keep their interest in the home.
What Is an Interspousal Transfer Deed?
An interspousal transfer deed is like a quitclaim deed. It says that one spouse is transferring their interest in the property to the other spouse. There may be legal or tax implications for the type of deed you sign, as well as for when you sign it.
Always review any legal documents with your lawyer before signing anything—or passing it along for your spouse to sign.
What if Your Spouse Won't Sign?
If your spouse is angry with you or non-communicative, getting a quitclaim deed or an interspousal transfer deed might be tough. You may be tempted to buy the home in the name of a family member or friend. Avoid this. If you use joint assets to conceal a purchase, it could come back to bite you later.
The bottom line is that if your spouse refuses to cooperate, you might not be able to buy a home until your divorce is final.
In California, the legal procedure of bifurcation restores your status to that of a single person while the other aspects of the divorce are still being worked out. It takes place six months after your spouse is served with divorce papers. So you might be able to purchase a home once this time requirement is met.
Court Approval of Sale
Some states will require that a divorcing party obtain court approval to buy a home while in the middle of a divorce. This occurs more often when "marital assets"—money or equity accumulated during the term of the marriage—are used to buy a home.
Ask your lawyer if you need court approval to buy a home while divorcing. Don't just run out and pay cash for the home, hoping no one will notice. Someone will find out. You don't want to make false statements on court documents.
Can You Get a Loan for Buying a Home?
The first problem might be affordability. If you were a two-income family, dropping to a single-wage earner household might reduce your buying power for a home. Newly single women are often affected more than men because women still do not earn an income on par with men.
The second issue could be getting past underwriting to qualify, due to increased expenses such as alimony or child support payments. Lenders compare your gross monthly income to your monthly debt payments to arrive at your debt ratios. Your back-end debt ratios include your new mortgage payment, as well as your other debt. If your back-end debt ratios are too high—typically, over 43%—you might get rejected. The underwriter may want to see evidence that your debt load will not change after the divorce. If you are still sorting out the details and negotiating, this could cause loan rejection.