During your divorce, you may be wondering where you’ll live next. You’re either still living with your ex, have moved in with a friend or family member, or started renting an apartment. It’s only natural to want to begin the next chapter of your life. That usually includes purchasing your own home, one where your children can visit and have their own rooms. Although this is a great goal, it may be best to wait until after the divorce is finalized. Most legal and real estate professionals will urge you to hold off on big financial decisions such as this because they carry substantial risk.
The first major liability is that your spouse will claim partial ownership. When you purchase assets during a marriage, they’re typically considered community or marital property, meaning they’re jointly owned. The second is the use of marital funds. If you utilize money from a joint account acquired during the marriage to purchase the property or anything related to it, your spouse can claim rights to the home. Third, think about how this could negatively impact your proceedings. If you purchase a home during the marriage, it may limit the number of assets you receive in the settlement.
The final consideration is affordability. After your divorce, you’ll only have access to a single income and your portion of assets. You may also have to pay child or spousal support. You may want to test how your new financial situation will impact your budget before adding an additional expense. Plus, it may be tough to acquire a loan or get past the underwriting process.
If, after carefully weighing the decision, you determine you still want to purchase a home, ensure you take several precautions to mitigate the risks. First, talk to your ex, making it clear you need a place of residence for yourself and the children. If your split is amicable and mutual, it’s likely they’ll support you through this decision. On the other hand, if your divorce is contentious, they may deny your purchase, attempt to sabotage it, or claim it as marital property in the settlement.
Whether antagonistic or congenial, it’s best to ensure all documentation such as contracts, offers, mortgage, tax and closing documents, and bills of sale is in your name and signed by you alone. This creates a separation between you and your spouse, confirming you made the purchase alone. Further demonstrate this by paying for the home and all related costs with separate funds. If you don’t have your own bank account or credit card, it’s time you create them.
It’s also best to get clarification of single ownership in writing.
“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,” states financial website The Balance.
It’s a good idea to get a legal property agreement in non-community property states, as well. The downside is your spouse can still refuse to sign this agreement.
Depending on the state, the judge may require you to obtain court approval before you purchase a home in the midst of a divorce. The state in which you live can also determine whether you can file for legal separation, which severs financial ties between the partners.
“After a legal separation, property and debt are considered separate,” states advice about home buying posted on the website of Wisconsin-based Sterling Law Offices, SC. “Legal separation requires grounds, unlike divorce which is no-fault.”
However, it adds that legal separation may take longer than a divorce, so it may be best to receive your spouse’s blessing.
For more information about purchasing a home before, during, or after your divorce, reach out to one of the professionals listed in our DivorceForcePRO network. You can find real estate experts such as realtor divorce specialists in your area! Click here to find the right one for you.