This paper presents new graph partitioning algorithms for domain decomposition-based simulations whose subproblems are solved using sparse direct factorization methods (e.g., FETI). These algorithms simultaneously balance the number of nodes assigned to each partition and produce a fill reducing ordering that balances the fill-in of the subdomain matrices, while minimizing the edgecut. Experimental results from a wide range of applications show that these algorithms can reduce the fill-in of overweight subdomains and achieve considerably better balance.