Smart Moves by Ellen James Martin

Buying a Home After a Divorce

Contrary to popular belief, the divorce rate is declining in America. But that doesn't alter the fact that marital breakups are often traumatic. To avoid a costly error, those who advise the newly divorced caution them against hasty financial decisions.

Buying a house right after divorce could prove a regrettable idea -- given the size of a home purchase, says Nicole Nenninger, a psychologist and author of "Transforming Divorce: How to Get Back on Track and Create a Life You Love."

"After divorce, it can take six months to a couple of years or longer to get your financial wits about you," Nenninger says.

James Frazin, a financial adviser affiliated with the Garrett Planning Network, says the emotional turmoil of divorce makes it tough to resolve financial issues "until the atmosphere has cleared."

Tom Early, a real estate broker and past president of the National Association of Exclusive Buyer Agents, says it could be prudent for new divorcees to take a short-term rental before heading into a home purchase.

Here are a few home-buying pointers for those fresh from a breakup:

-- Seek out objective financial help to shape your buying plans.

If you can afford it, Early suggests spending a couple of hours reviewing your current budgetary picture with an accountant or financial planner. One way to find a fee-only planner near you is through The National Association of Personal Financial Advisors (napfa.org).

An adviser should help you outline a financial plan for the next five years and decide how buying a home fits into that plan.

"Go for a holistic plan, but don't attempt to project more than five years out, which is as far as you can reasonably go," Early says.

-- Receive the advice of mortgage lenders with a degree of skepticism.

It's a wise idea for all would-be buyers to gain mortgage pre-approval before venturing out to see properties. This helps ensure they won't waste time looking at homes that are too expensive for them to finance. Also, a pre-approval letter gives them more credibility with sellers when bargaining for a home.

But Frazin, who heads his own financial planning firm, points out that even now, many years after the nation's mortgage crisis, homebuyers can sometimes gain approval for a larger mortgage than they can truly afford.

"Besides your credit scores, mortgage lenders look mainly at your overall debt-to-income ratio and then qualify you for the maximum," he says.

No doubt the lender will know if you're obligated to make child support or alimony payments under a legal agreement. But after moving, you could face many other expenses that the lender doesn't count.

"What if you need money to repaint the house, add drapes or buy furniture? Your lender isn't going to take such costs into account. This has to be part of your own planning process," Frazin says.

-- Don't engage a real estate agent who tries to rush you into a purchase.

"Watch out for any agent who seeks to pressure you into buying before you're ready. That's the last thing you need right after divorce," Early says.

Prior to committing to one agent, he recommends you interview at least three candidates.

"Have a consultation with each one and see if you have a personality match. Look for someone who listens to your needs," Early says.

He contends it's a smart strategy for newly separated or divorced people to begin working with an agent as soon as they're sure they'll be buying a home. At this preliminary stage, the agent can help you get an overview of your market area.

"Look for someone who will take the time to scout out different communities, price points and types of housing at a pace that feels comfortable to you," Early says.

Agents who enjoy working with buyers often gain special expertise in this area of the real estate business. You can find such specialists through the Real Estate Buyer's Agent Council (rebac.net), or by contacting The National Association of Exclusive Buyer Agents.

-- Visit alternative neighborhoods before buying a home.

Newly separated or divorced people, especially those on a tight budget, can face difficult trade-offs in terms of location. To obtain the type of home they're seeking, some might believe an outlying suburb is their best choice.

But if you plan to start dating soon, an outer tier community could be a lonely choice.

"In the far-out suburbs, you're less likely to find the kind of social life you'll want than if you live in a city or town center," Early says.

Nenninger says that divorced homebuyers with young school-age children and joint custody have other factors to consider.

"If you and your ex stay in the same area, you increase the chances that your young kids can remain in the same schools. You're also likely to see the kids more often," she says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)