Buying your first home post-divorce, especially when you have kids, can be both an exhilarating and nerve-wracking experience.
We talk to Diana Pilla, a realtor with eXp Realty in Pitman, NJ, about what you need to know when you’re ready to jump into the real estate market. “Having gone through a divorce at age 36 and becoming a single parent to two young children, I know both the emotional and financial sides of divorce,” she says. “I’m happy to share my experiences with my clients, knowing that each person’s circumstances are unique to them.”
Q. What’s the biggest challenges you see home buyers who are now single parents facing? Any tips on dealing with these issues?
DP: The first thing I recommend is the common sense advice of don’t let spite enter the picture. Don’t stop paying bills or the mortgage figuring you’ll hurt the other person. These types of decisions hurt both parties and ruin everyone’s credit, not just your ex’s credit. Second, keep your “financial wits” about you. Don’t fall into the doldrums of not caring or allowing the bills to pile up. It’s better to face them now financially and emotionally, rather than later.
The biggest challenge is getting your emotions in check and facing what’s ahead. Someone reading this may be thinking, “Yeah, right. It’s that easy!” No, it’s not that easy and it takes time. I’m on the other side of it now. I’ve taken the divorce journey and raised two children as a single parent. I’m happy to say that we all came through it, and life is good.
However, when you’re ready to purchase your first post-divorce home, your biggest challenge may be accepting that you may not be able to afford what you had when you were married. Being on a reduced income doesn’t stop you from purchasing a home. What you can buy now depends on your reduced income and other factors, as determined by mortgage lenders such as debt-to-income ratio.
If the marital home was a two-story, five-bedroom home with a swimming pool funded with two paychecks, you may now only qualify for a two-story, three-bedroom home without a swimming pool. Or, perhaps you need to look at condos.
Bad credit isn’t forever, but it may delay you from purchasing a home now, but not forever. You need to be willing to work on remediating it.
Q. How does a couple contemplating a divorce deal with the issue of their marital home?
DP: If the couple owns a home, the first thing is to decide how to dispose of the property. There are two options: buyout or sell. Can one spouse afford to buy out their partner’s share of the house or do they want or need to sell it allowing them to split the net proceeds and move on?
Q. What are some of the upsides to being a single parent home buyer after a split?
DP: For me, the biggest upside was the pride that I took in being able to purchase a home on my own. My ex-husband and I did a buyout. I bought his share of our marital home, enabling me to keep our children in the home in which they were born for six years after our divorce was finalized. Ultimately, I did sell it when my oldest child entered high school and bought another house. To this day, it’s still something I’m proud of and thankful to have had.
Whether you’re a man or a woman, doing something as huge as providing a home for you and your children on your own is a feeling you never let go of or lose. That feeling is the same whether you’re purchasing a home or renting one.
Q. A home buyer can choose whether to rent or buy. In some areas of the country, it can be cheaper to buy; when you buy, you build equity in your home, get a tax break and can do what you want to the property. With renting, you have fewer or no maintenance costs, and you have the flexibility to relocate. Thoughts on how to decide whether to rent or buy?
DP: If you have credit issues, you might be limited to renting until you remediate your credit score. Renting could also be an intermediate step to the home-buying decision. That allows you to take time to make a clearer decision about what’s best for you and your children.
To buy or rent is really a personal issue. Why are you buying? Perhaps to maintain a lifestyle, or to provide your children with a situation in which they’d be most comfortable. Perhaps going from a family home with a yard and other amenities to an apartment would make the transition more difficult for them.
I’m not a financial advisor, but from my experience, you need to be realistic as to what you can afford, and provide the best that you can afford for your children.
Q.What’s the best way to determine how much you can spend for a home as a single parent?
DP: There are recommended percentages, but everyone has their own comfort zone. If you’re purchasing a house, the first thing you need to do is get pre-qualified from a mortgage lender. The mortgage lender will decide how much house you can purchase based on a number of factors. It takes the guesswork out for everyone.
This allows you to know your maximum purchase power and saves you from looking at houses that aren’t within your price range. Your real estate agent can’t even put an offer in for a house without submitting your prequalification letter.
In other words, you can’t purchase a $200,000 house if the mortgage lender only qualifies you for $150,000. Of course, there are other monthly expenses to consider beside mortgage and property taxes.
I recommend finding a mortgage lender with whom you feel comfortable and sit with them to evaluate the overall picture. You may get prequalified for more than you feel comfortable spending on a house. That’s okay. A prequalification only lets you know the maximum mortgage for which you could possibly be approved. Everyone has their own comfort zone as to how much money they need to have leftover after all monthly house expenses are paid.
Q. If a single parent decides to purchase a home, what kind of costs do they need to be prepared for? For example, you need to think about a down payment, mortgage fees, and insurance, a home inspection and appraisal, just for starters.
DP: While this may not be a single parent’s first home, it may be the first home that he or she has bought on their own so this guide will work well for them.
Let’s address the down payment. The ideal down payment is 20%. Why? Because it eliminates the PMI (Private Mortgage Insurance) that lenders charge on loans with less than 20% down. There are other options available for anyone looking to purchase a home: conventional loan (5% down); FHA loan (3.5% down); USDA loan (0% down, and the property must meet basic eligibility requirements set forth by the USDA which covers rural area, occupancy and physical condition of the home); and VA loan (0% down).
Other costs to expect upfront:
- Application fees for a mortgage application.
- Home appraisals are done by the mortgage lender to verify that the home is worth at least its market value but paid by the purchaser.
- Inspection of the home by a licensed home inspector. While a home inspection isn’t required by the mortgage lender you’re well-advised to have one done on the home you’ll purchase.
- Termite inspection, which is generally required by the mortgage company.
- Closing costs such as title search, title insurance, prepaid property taxes, prepaid homeowner’s insurance, to name a few. If you’re purchasing a home in an HOA community, there will also be prepaid HOA fees and a capital contribution required. Closing costs are in addition to the down payments.
Q. How can a realtor help a newly single home buyer during the process?
DP: I like to educate my clients on the process of home buying if they’ve never done it on their own. Knowing the steps and the players demystifies the process. Your realtor is there to help navigate the process step-by-step. Realtors are your advocate in handling questions and concerns. They also resolve issues and “hold your hand” when you need that support, too
Click the links below to download brochure - courtesy of Diane Pilla.
“Buyout or Sell: Two Paths for Selling Your Home Due to Divorce”
About Diane Pilla
Diane Pilla is a realtor with eXp Realty in Pitman, NJ. With a background in education, she loves educating her clients who are first-time home buyers or those who haven’t bought a home in quite a while as much has changed over the years. She has also been an Advertising Senior Account Executive. Contact Ms. Pilla at email@example.com.
If you need assistance with a family law matter, our attorneys at Smedley Law Group can provide you with the professional advice you need to make an educated decision. Schedule a consultation with one of our attorneys today.
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