You Can Buy A House While Getting Divorced
I had a divorce client ask a very good question this week. She happened upon a house for sale that fits her needs perfectly. But we are nine months away from her scheduled divorce trial and she wanted to know what she could or should do since her divorce was pending. This is not the first time I have had this issue come up in a divorce so I figured that it would make a good blog post.
In a New York divorce action any property purchased or acquired by a party after the commencement date of the divorce action is their separate property. Separate property, is not subject to equitable distribution. So if you purchase a house while your divorce action is pending, it will not be subject to equitable distribution and your spouse will not be able to make a claim against it. There is no need to put the house into the name of a third party or come up with some scheme to shield the house from the divorce.
However, the money used for the down payment on the house is another issue. If that money comes from marital funds, then that money is marital property and is subject to equitable distribution. If the down payment money is a gift from a relative or friend, then it is separate property and not subject to equitable distribution.
To the extent that there is a mortgage loan made for the balance of the purchase price of a house, this would be separate debt since it accrued after the commencement date of the divorce action. The spouse who took the loan would be responsible for it. Their spouse would not be liable for any portion of this debt.
The problem most people have when they look to buy a new home while getting divorced is that they are saddled with the debt on the former marital residence. This makes it very difficult to get a bank to lend them money. That first mortgage usually makes their debt to income ratio too high.
Another issue that often hampers people from buying a house while their divorce is pending is that their maintenance obligation or award is uncertain. Without knowing how much money one will receive or pay out each month it is hard to know what type of mortgage one will be able to get. Child support can be a little easier to deal with since New York has the Child Support Standards Act that has statutory percentages for child support. This allows divorcing parties to predict child support obligations with a great degree of certainty in many cases.
If a third party, such as the parent of a party, co-signs for the loan, this will not change the marital/separate property analysis. However, this often allows people to get a loan for which they otherwise would not qualify based upon their income alone or while they still are on the mortgage for their former marital residence.
In any event, before purchasing any big ticket items, much less a home, during a divorce, parties should consult with their divorce attorney. As with most everything in a divorce, buying a new home should be done only after careful consideration and with the advice of an experienced divorce attorney.