Divorce is hard no matter the situation. Dividing assets, the emotional strain, and the financial stress can be a lot for a person to handle. Whether or not you initiated the process, you probably have a million questions racing through your mind, especially if you’re now out of a place to live. You may ask yourself, how do I go about finding a new home? Am I even allowed to buy a house during a divorce? How do the rest of my assets and debts factor into purchasing a new home?
These are just a few things to look at when you hope to buy a house during a divorce. Realistically, any major purchase during this time needs extra consideration. Houses are a big one, but buying a new car, for example, also requires similar due diligence.
Can You Purchase A Home During Divorce?
The short answer is: Yes, it is possible to purchase a home during divorce proceedings.
However, both spouses need to cooperate. If both parties aren’t on good terms, that throws a wrench into the works.
Assistance from both parties is needed because title companies in community property states require the other spouse to sign and notarize a type of quitclaim deed. A quitclaim deed disavows any required interest in the home. Even in non-community property states, the purchase of a new home in the middle of a divorce might be considered a marital asset.
If you purchase a home during a divorce and the opposing party doesn’t sign away their right to ownership, the court often views it as an asset during the divorce.
If you’re not careful, your ex may inadvertently wind up with rights to your new house.
Additionally, such a large investment may also affect the way the court splits assets and debts. This can drastically decrease the amount awarded to you and impact your financial future.
Related Reading: Avoiding Foreclosure If Your Ex Won’t Sell Your Home
Can You Put the Home In Someone Else’s Name?
As the saying goes, just because you can do something doesn’t mean you should.
Buying a home using a family member or friend’s name may still be seen as using joint assets to conceal a purchase. It’s illegal to hide joint assets during a divorce. As one might expect, the court doesn’t look favorably on those who use the aforementioned way of buying a home.
People sometimes believe that if they use cash to purchase a home it won’t look like they used marital assets. That is not true. Cash accumulated during the marriage still counts as a marital asset.
Hiding assets also causes legal problems down the line such as penalties or even jail time. When buying a new home during a divorce, it’s important to do it all above board.
Related Reading: High Asset Divorce Mistakes
Do I Need The Court’s Permission to Buy A House During Divorce?
Some states may require court approval to buy a house in the middle of a divorce. This is relatively common when using marital assets to buy a home. Particularly in the nine community property states:
- New Mexico
In a community property state, the debt-to-income ratio includes your spouse’s debt. This often negatively influences the ability to receive a government-backed loan.
Related Reading: We Bought a House Together but Broke Up, Now What?
Can You Afford A New House?
This is a big question, one many people fail to ask themselves.
Divorce dramatically alters your finances. What you could afford before may not be realistic after. It’s important to account for that so you don’t wind up drowning in debt just to buy a house.
Before making a large purchase, consider what the future looks like financially.
You face big changes, such as going from a two-income household to surviving on a single paycheck, adjusting to additional expenses like child and spousal support, or the loss of other assets, like retirement and stock portfolios divided during the divorce.
Afterward, you’ll likely need to adjust to a new financial reality, one that may be very different from before. This may not be the best time to saddle yourself with another major purchase.
There is a possibility that finances will be tighter than they were previously. But that doesn’t mean they’ll stay that way forever.
Taking into account what you can realistically afford and drafting a long-term plan that includes the purchase of a home down the road may be more beneficial than purchasing one in the middle of a divorce.
Related Reading: Moore Marsden, Shared Homes, and Divorce
If You Still Want to Buy A House
While there’s no magic fix if your spouse refuses to sign a quitclaim deed, there are ways to potentially avoid having the new home viewed as a marital asset.
While it isn’t a definitive solution, having all documentation be in the name of the person buying the home, including pre-sale documents such as the contract with the realtor, purchase offers, the sale contract, and any mortgage taken out, helps build a case that the home belongs entirely to you. This also includes all closing documents such as settlement statements, the bill of sale, tax documents, and the deed.
If you use any marital assets when purchasing the new home, the opposing party has grounds to claim ownership. In order to avoid this, use separate funds for all costs, including down payments and inspections.
Even taking these steps, there’s no guarantee a judge will consider the home separate property. Making a large purchase during a divorce can be complicated. In order to ensure you do it right, it’s in your best interest to speak to a divorce attorney.
Related Reading: Rebuilding Finances Following Divorce