USE ALIMONY TO QUALIFY FOR A MORTGAGE
Nobody goes into a marriage planning on getting a divorce, but unfortunately it happens. In those instances there is usually a bread winner who is the higher earner. The lower earning spouse is counting on the higher earner in order to pay bills, live, etc. and they often forego any future, higher earning jobs because they may be raising the children or taking care of the home while the other spouse is working. It’s an equitable split of labor and responsibility. When spouses split up the lower earner is entitled to compensation through alimony.
Use alimony to qualify for a mortgage, documentation
- A copy of a divorce decree or separation agreement (if the divorce is not final) that indicates payment of alimony or child support and states the amount of the award and the period of time over which it will be received.
(Note: If a borrower who is separated does not have a separation agreement that specifies alimony or child support payments, the lender should not consider any proposed or voluntary payments as income.)
- Document a minimum of three years continuance of alimony receipt
- Any other type of written legal agreement or court decree describing the payment terms for the alimony or child support.
- Borrower must have received at least six monthly payments to date. One thing to remember is that the individual paying alimony must have been paying it on time, late payments will not help the borrower’s situation because the income is no longer considered to be consistent. Don’t allow the ex-spouse off the hook with late payments because it will affect the borrower’s ability to get a mortgage.
THIS IS HOW YOU USE ALIMONY TO QUALIFY FOR A MORTGAGE
Additional thoughts on divorce and qualifying for a mortgage. I’m lucky to have a group of attorney’s who refer me divorce clients, and they also just call me to make sure they are setting up the divorce agreement in a manner that will not put one spouse in a bind in the future. Often we see clients who come into our offices where they have had an attorney work up divorce paperwork requiring the spouse who remains in the house to refinance that loan in less than six months. The issue is that the spouse who is remaining is the one receiving alimony and doesn’t have the income to qualify for the replacement mortgage without the alimony. This presents a very obvious problem for the remaining spouse because they will not be able to abide by the agreement which they signed off on, and it also presents problems for the exiting spouse because that person may not qualify for their own new mortgage on a replacement property because of the current mortgage obligation on the departed residence. One thing the departing spouse can do in order to help with that obligation is to immediately get off of title, the method varies depending on your state, but the idea is that, while the departing spouse may still be obligated on the mortgage payment while the remaining spouse is in process of refinancing, they will not be held liable on the property taxes or insurance payments on that residence if they do decide to get another mortgage. This may be a huge monthly savings for the departing spouse because some states are high property tax states. This exemption from including the property charges into the debt calculation of the departing spouse may be just what is needed.