It’s natural to want to start fresh after a divorce, and many people begin by looking for a new home. This is a chance to have a place of your own where you can make happy memories during this new chapter of your life. Of course, buying a house post-divorce requires money, and if you have just concluded your divorce proceedings, you may be lacking the necessary funds.
For some divorcees, it may only take a few tweaks to get your finances in order. For others, it can mean starting from scratch. If you are looking to buy a house post-divorce, here are some tips that you can use to put your best foot forward.
How to Prepare Your Finances to Buy a House Post-Divorce
Rebuild Your Savings
If you took a financial hit during your divorce court proceedings, then you will need to rebuild your savings and expendable funds so you can afford the many aspects that go into buying a house. These include a real estate agent, a home inspector, and the money necessary for a down payment.
Start by making a budget that accounts for the earnings you take in on your own and the expenses you pay. If you are receiving child support or alimony, add that in as well, and remember to include every little cost you have, from the electric bill to grocery shopping costs.
Be smart about the money you have left over after your expenses and add that money into a high-interest savings account that will help to build up that nest egg faster. You can save more by cutting down on unnecessary expenses like going out for coffee and lunch and by unsubscribing from that streaming service that you rarely watch. If you are still coming up short, you could look at a second job such as working for a rideshare or food delivery service.
You could also get the money you need by selling your current house to afford the new dwelling. Even if you do not have sole possession of the house, but the divorce was amicable, you can still try to reach an agreement with the other person to sell the house together and divide the profits. If you do decide to sell, you should work with a real estate agent who can handle the ins and outs of this delicate matter.
Improve Your Credit
Perhaps the most important key to securing a home loan is to have an adequate credit score. A number above 620 is typically the bare minimum that lenders will consider when deciding if you are worthy of a loan. After all, if your credit report shows that you are behind on smaller bills, how can they trust that you will pay this larger debt?
During a divorce, it can be easy to get lost in emotions and stress and forget about paying your bills, but if you do, your credit score will suffer. After the divorce, work to recover your score by lowering your credit card debt.
You can either pay back all the small debts first or work on the largest card, but, either way, you need to make an impact. If the other person in your divorce handled most of your finances before, then you should try to take out your own credit card now to prove that you can borrow responsibly.
If you have joint credit cards, then you should immediately request that either you or your ex-partner be removed from the card, so any big spending or lack of on-time payments by the other party does not negatively affect you. During this time, you also want to monitor your credit report to ensure that there aren’t any mistakes or false debts that are bringing you down when they shouldn’t. If you notice any issues or you have questions, contact the credit bureau to inquire.
If Your Loan Application Is Declined
Even if you believe you have all of your financial ducks in a row, there is a chance that your application for a home loan will be declined. By understanding this possibility, you can better prepare your plan of action and improve your chances of securing a home.
One of the main reasons that you may be declined is that you simply do not have enough income to prove that you can afford to pay this large loan. If this is the case, you can either find supplemental income through a second job or add more to the down payment to reduce monthly payments.
Another reason you may be declined for a mortgage is that you recently had a job change. Again, lenders want to see that you will have sustainable income that will allow you to make your payments for years to come; if you are new to a job, they can’t be sure that you will have that same job – and pay rate – down the line. If you didn’t have to work while you are married and now you are scrambling to find employment, you might consider an employment agency.
Getting and keeping a job can be easier said than done, especially during the COVID-19 pandemic and the uncertainty going forward. This is why it is important that you stand out at the job you already have so you can ensure a meaningful future with the company. Be proactive as you look for opportunities to learn additional tasks and communicate often with management. When you talk to them, explain any issues you have completing your current duties and express the desire to grow with the company.
Divorce can be a messy business, but buying a home to start your new life doesn’t have to be. Start preparing your finances and rebuilding your credit now, and the dream of a new house can be a reality.