Can You Buy A House During a Divorce?
January 20, 2023
Divorce proceedings are always tough, even in the best of circumstances. They completely rehaul finances, assets, and basically everything that was once shared between two people. Oftentimes, one of the financial decisions to make is whether it’s possible to buy a house during a divorce. The answer is yes, it is possible to buy a house while going through a divorce. However, there are major risks that come with it. Here are some tips to ensure you make such a large investment successfully during this trying time.
The Risks of Buying a House in a Divorce
When you’re going through a divorce, buying a house isn’t straightforward. Divorce is a legal process that can take months or even years to complete. During this time, any and all major financial decisions will be considered in the context of dividing marital assets. Here are a few of the risks to consider before buying a house during a divorce.
- Depending on the state you live in, your house may be considered marital property. This means it would be divided in the divorce settlement and you won’t have any say in who gets what.
- If you have joint finances like a combined bank account, buying a house with those finances could give your spouse the right to half of that property.
- A divorce can leave both parties with a lot less cash on hand than they had before. Be mindful of any new debt incurred by buying a house in this situation because it could make mortgage payments or even a down payment difficult to pay.
- The court could take your buying of a property into consideration as they determine how to split assets amongst the divorcing parties. This could lead to a less favorable settlement for you.
Tips on Buying Property During a Divorce
It’s important to be careful and mindful when buying a property during a divorce. Here are some tips to help you buy the house you want without any major problems.
1. Community Property State Laws
Community property laws vary from state to state. If you live in a community property state, any asset and debts acquired by either party in a marriage is shared equally between both spouses and has to be split in the divorce settlement. Even if you buy a house while separated, the house may still be considered a marital asset if the divorce is not official. Debt incurred by either spouse is considered a joint responsibility, which can potentially limit your ability to qualify for loans. There are nine states that are considered community property states.
- New Mexico
Other states use common law which allows spouses to acquire assets and debt individually. If you do live in a community property state and want to buy a house during a divorce, there are ways to protect yourself.
Use a Quitclaim Deed or Interspousal Transfer Deed
Title companies in a community property state require the other spouse to officially deny any interest in the property before you buy it. This can be done with a Quitclaim Deed which is a legal document that transfers property rights from one party to the other. An Interspousal Transfer Deed can also be used for the same purpose.
2. Separate Your Finances
When paying for closing costs, it’s important to use personal funds instead of joint marital bank accounts. Otherwise, your spouse may have legal claim over your newly acquired property. Make sure you separate your finances before buying a house and only use your own money for the purchase.
3. Put The Documents in your Name
To avoid any issues in community property states, some home buyers attempt to use a friend or family member’s name on the documents for the transaction. However, this can create a whole new set of problems for you as the homebuyer. Not only could you be charged with mortgage fraud, but if the divorce courts discover your actions, you could face serious consequences.
4. Consider Finances After The Divorce
Divorce completely changes your financial situation. You may have alimony, child support, and other financial obligations to consider. After a divorce, making monthly mortgage payments or even qualifying for a government backed loan may be difficult. Make sure you consider your post-divorce finances before deciding to purchase a house.
5. Removing a Spouse’s Name From a Mortgage
Divorce doesn’t automatically get a spouse removed from a mortgage. If you and a spouse are both liable to a mortgage, then you’ll have to refinance the mortgage in order to remove one of the names from the loan. Other ways to get a spouse removed from a mortgage include selling the home and splitting the proceeds, or a buyout by the person remaining on the mortgage.
Real Estate Agents Make Buying a House During a Divorce Simple
Buying a house during a divorce is a completely different process than purchasing one in a traditional real estate transaction. The process can be complicated and confusing, but working with real estate agents can make the process easier.
A great real estate agent like a Negotiator can help you navigate the legal aspects and understand the financial implications of buying a house in these times. They can also help negotiate a favorable purchase price and make sure the process is completed smoothly. Negotiators are also readily able to accommodate and work around whatever timeline works best for you.