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Buying Big Ticket Items Following a Divorce

Buying Big Ticket Items Following a DivorceOnce a divorce is finalized it’s time to resume your life, as much as you possibly can. A step that many recent divorcees take is buying a new home or car. You might think that a big ticket purchase might be years down the road for you, but it can be done if you plan accordingly. To help you along this path, we’ve put together some tips for purchasing a big ticket item after divorce.

Have your name removed from any mortgages

If the marital home or vacation home, or both, were awarded to your former spouse in the divorce, make sure your name is removed from the mortgages. Since these properties were awarded to your ex, you are no longer responsible for making payments on the mortgages. The sooner you have your name removed, the sooner you can move on with buying a new home.

Finalize the division of finances

The divorce decree issued by the court will determine how marital debts and other finances are divided between you and your former spouse. The separation of your finances will ensure that your credit report accurately reflects the debt you are responsible for and the assets you own. If you do not separate your finances as outlined by the divorce decree your credit score could take a major hit, impacting your ability to buy a new home, car, or other large purchase after divorce.

Conduct a thorough and honest review of your finances

Once the dust has settled on the divorce, sit down to conduct a thorough and honest review of your finances as a newly-single person. Write down all of your income, including any alimony support payments you receive from your ex. If you receive alimony, this will help when applying for a mortgage or an auto loan. If you are the one paying alimony, this will be included in your debt-to-income ratio.

The debt-to-income ratio (DTI) will also take into account any other payments you make on property owned during the marriage. However, if the property was awarded to your former spouse, you can request that the lender remove this from the DTI.

Tell the lender your story

You might not want to believe it, but lenders view applicants as more than just people with good or bad credit scores. For example, if your credit score was strong prior to the divorce, the lender might be willing to overlook a reduced credit score. This might be especially true if your credit score was strong for quite a few years leading up to the divorce. It shows the lender that the divorce, and the divorce alone, is what led to a dip in your credit score.

Acquire pre-approval before making any offers on a new home

The smartest thing you can do following a divorce when looking to buy a new home is to acquire pre-approval for a mortgage. Avoid making offers on a home before a lender pre-approves you for a mortgage. Having pre-approval shows home sellers that you are in a good financial position to buy a home and that you are not promising money that you do not have.

Prepare a down payment

Whether you are looking to buy a new home or a new car, it is best to have a down payment prepared. While this is a good rule of thumb when making a big ticket purchase, it is especially important following a divorce. A down payment can help you acquire a lower interest rate, can prevent you from racking up negative equity quickly, and shows the seller you are serious about making the purchase.

Be realistic about your home and vehicle dreams

Coming out of a divorce brings many challenges, including who will have custody of the children, who pays alimony, how debts and assets are divided, and much more. One of those additional challenges is buying a new home or car. If you are in the market for either of these items, you need to temper your expectations.

You should not try to purchase a sports car or a luxury brand vehicle for your first car purchase after going through a divorce. The same goes for buying a home. Stay away from homes that have listing prices of hundreds of thousands of dollars or more. You need to think minimally at this point in your life.

Remember that starter home you and your former spouse bought when you first got married? Well, it’s time to revisit owning a starter home. There’s nothing wrong with buying a one bedroom, one bathroom home after divorce. You can always buy a pullout sofa for your children to sleep on when it is your turn to have them for the week or weekend.

As with any type of big ticket purchase, it is important that you discuss your options with a financial expert, such as your accountant or financial planner. It also doesn’t hurt to have a discussion with your divorce attorney. All of these professionals can point you in the right direction when looking to buy a new home or car following a divorce.

Divorce is a difficult decision to make. Put your trust in the experienced and compassionate Charlotte divorce attorneys at Epperson Law Group, PLLC, when considering filing for divorce. Call our office or submit our contact form to schedule an appointment today. We have offices in Charlotte, Weddington, Concord, and Boone to better serve you.