Buying a Home When Getting Divorced
Divorce is never easy. Whether you were the one who initiated the proceedings, or walked out on the relationship, it is still painful, and you will grieve the loss. Not only will you lose your spouse and coupled marital status, you'll probably experience a loss of sleep and appetite as you struggle with financial losses as well.
Quitclaim Deed or Interspousal Transfer Deed
While it might not be an ideal time to buy a home, you still need a place to live and, if you're used to living in a home you own, you may want to buy another home right away. Buying a home when getting divorced is possible, but you might need the cooperation of your spouse.
Title companies in community property states will require your spouse to sign and notarize a type of quitclaim deed, disavowing/transferring any acquired interest in your home. Even non-community property state laws might consider the purchase of a new home a marital asset while in the midst of a divorce.
If your spouse is angry with you or non-communicative, obtaining a quitclaim deed or an interspousal transfer deed might be difficult to impossible. You might be tempted to buy the home in the name of a family member or friend, but avoid it. If you use joint assets to conceal a purchase, it could come back to bite you later.
The bottom line: 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 hammered out. It takes place 6 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 nobody will notice. Somebody will find out. You don't want to make false statements on court documents.
Obtaining 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 purchasing power for a home. Newly single women are often affected more severely by this 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. If your back-end debt ratios are too high, 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.
Furnishing Your New Home
There are many things to buy after buying a home. After the divorce, you could be left with less than half of your home's furnishings. Generally, joint credit card accounts are closed. You might decide to take a roommate to cut expenses. Whatever it takes, you have the opportunity to start fresh in your own new home.