After Divorce, Tips to Buy Home

After Divorce, Tips to Buy Home

Real Estate: What You Should Know Before You Buy a House after the Divorce

Let’s say you just got a divorce and you and your six-year-old daughter are on your own. You’ve got a pretty good job and you’re thinking about buying a home on your own. What’s your first step? Here are a few tips to help guide you in the process.

1. First, ask yourself, is home ownership right for me?”

According to the Federal Housing and Home Loan Mortgage Corporation, better known to the public as Freddie Mac, you should review your current finances and determine:

1. Do you have a steady job and a source of income for at least the next two years?

2. Do you have reasonably good credit history?

3. Can you afford to assume the costs associated with home ownership — repairs or insurance, for instance?

4. Do you have enough money set aside to put a down payment on the home you want to buy and to cover closing costs?

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If the answers to these questions are yes, the folks at Freddie Mac say home ownership might be right for you.

2. Second, consider the benefits of home ownership.

Owning a home gives you a place to call your own. It also makes you a part of the community. Other pluses include:

1. By making monthly mortgage payments, eventually the home will be yours. If you are renting, you’ll pay the rent and have nothing to show for it.

2. If you select a fixed rate mortgage your payment won’t ever increase. The same can’t be said if you’re a renter.

3. Home ownership can be a nest egg that usually increases in value during the time you own the home.

3. Think about how any financial fallout from your divorce will affect your ability to buy a home.

“If your credit wasn’t injured during the divorce then it shouldn’t be hard for you to get a loan,” says Paul DaCosta, a North Port, Florida mortgage broker specializing in foreclosures. “If you have a job and you’re paying your bills on time it shouldn’t be hard at all,” he adds. Sometimes though, one of the parties decides to make it financially tough on the other. “What usually happens,” DaCosta says, “is both ruin their credit rating. My suggestion in a situation like that is be proactive. You need to explain to your creditors you’re in the process of getting a divorce and you may be a little late on your payments.”

4. Understand the additional costs of homeownership.

With a 20 percent down payment on a home, the lowest rate available at this time for a 30-year fixed rate loan is about 6 percent, according to DeCosta. Even though it’s a buyers market, home ownership isn’t for everyone. There are some down sides. Among them:

1. If you’re forced to sell your home, given the current climate in the real estate market, it may be tough. Hiring a Realtor® will probably cost up to six percent.

2. Home value can depreciate if you don’t maintain the property, the neighborhood deteriorated or a recession occurs. It doesn’t happen often, but it does happen.

3. When you lose your job, it’s easier to find a cheaper rental than to sell a house. All the while you’re trying to sell, you’re responsible for the mortgage.

Still, Vincent Bindi, a broker with a firm in Orange County California, says, “Ninety-five percent of the people who go through a divorce end up with credit problems and bad debts. This makes it almost impossible for them to buy a home in today’s real estate market. But if their credit is good, the present market…offers a perfect time for a divorced person, or anyone else, to buy a home.” In Orange County, prices in some communities have decreased 20 to 25 percent below “what they were two years ago and interest rates are extremely low.”

After weighing the positives and the negatives, if you decide to make the leap into homeownership, it might be nice to get a feel for what your monthly mortgage payment will be for your new home.

If you gross $50,000 a year, your monthly debt is $1,500 and you can put $10,000 down and come up with the about 5 percent in closing costs, then you can afford a home of approximately $138,000 at an annual fixed rate of 5.75 percent, commission paid over 30 years. The bottom line is your monthly mortgage payment will be about $745.

Don Moore is a veteran newspaper editor and reporter who spent more than 40 years working at newspapers around Florida. He recently retired from the Port Charlotte, Florida Sun-Herald. He can be reached at

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