Should You Buy a Home After a Divorce?

Going through a divorce isn’t an easy process, and once you’ve finalized, it’s natural to want to get your life back on track as quickly as possible. For many people that includes finding a new place to call home, but there is a lot to consider before you decide to buy.

Take a hard look at your finances—and your life—to find the best time for you to buy.

From a financial standpoint, there are many reasons why it’s better to own a home, as opposed to renting. For example, as you make your monthly mortgage payments, you’ll be building up equity in your home and increasing your overall net worth. Making monthly rent payments to a landlord is simply making that landlord richer, but not providing you with any financial benefits. You’ll also receive significant tax breaks as a homeowner with a mortgage. And, the interest you pay on your mortgage each year is tax deductible.

Once you’ve purchased your home and have acquired a fixed rate mortgage, for example, your housing costs will remain constant for the life of the loan. If you’re paying rent to a landlord, you could have to deal with annual rent increases. The best incentive for purchasing a home is that hopefully, over time, its value will increase.

WHAT’S YOUR SCORE?

Your credit score is made up of your credit score and the information on your credit report. A divorce can have a big impact on your credit score, which is a major factor in whether you can qualify for a new mortgage.

If your score is in the high-600s or better (ideally in the mid-700s), you should be in good shape. You can show a steady income and be able to provide tax returns, W-2 forms and/or pay stubs that document your income, investments and assets. You have enough savings to afford and down payment, plus cover the costs of purchasing a new home. You’ll be able to cover the ongoing costs of ownership on a month-to-month basis, including your mortgage payment, insurance, real estate taxes, utility bills, maintenance, repairs, and homeowner’s association/condo fees (if applicable).

To find out where you stand, order a copy of your credit reports and scores from the three major credit bureaus—Equifax, TransUnion and Experian.

What is Your Debt-to-Income Ratio?

Qualifying for a mortgage has changed since the recession. Today, the majority of loans are Qualified Mortgages, following a set of rules enacted by the Consumer Financial Protection Bureau. Your monthly debt (including your mortgage) cannot exceed 43% of your monthly pretax income to qualify. Any lender you choose will take a hard look at your debt-to-income ratio before approving you.

Taking the Plunge

If you decide that buying a home makes sense to you, getting pre-approved for a mortgage should be your first step. Talk to one of our preferred lenders (find a list at http://curtishomes.wpengine.com/about-curtis-homes/partners/) and they can help you get started with getting approved.

Your next step should be talking with a sales agent at Curtis Homes who can help you find an affordable home and guide you through the rest of the home-buying process.

 

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