If you’re making or receiving alimony, you might wonder how those payments will impact your decision to either keep and refinance your current house or find a new place to live once the divorce is over. The fact is, alimony can be a deciding factor for some banks when they are considering approving you for a new mortgage or agreeing to refinance an existing one.
For those who are paying alimony, making monthly payments to your former spouse can be viewed negatively by mortgage providers. If your alimony payments are ongoing and verifiable, the mortgage company will include them as part of your monthly debt obligations. If your total monthly debts, including your alimony payments, are more than 30 to 45 percent of your total monthly income, you may not be able to qualify for a mortgage or a refinance on your own.
For those receiving alimony payments, the monthly checks from your former spouse may be the boost you need to qualify for a mortgage on your own. In most cases mortgage companies will consider alimony payments as a source of income. Assuming your monthly income, including your alimony, is at least 50 percent more than your total monthly debt payments, you might be able to qualify for a mortgage.
If the bank does decide to accept alimony as a qualifying source of income, it will likely require proof of the payments. To serve as a basis for a mortgage, the payments usually need to be ongoing for a least the past year, and you must also show that they will continue for at least three more years. Previous payments can be shown by bank statements or canceled checks. Mortgage companies typically require a copy of the Divorce Decree or court records to prove that the payments will continue for the required amount of time.
Getting a new mortgage and starting over can be a scary prospect, especially for those without a large income of their own. If you’re facing the prospect of divorce and are worried about how it might impact you financially, contact an experienced family law attorney today to get help with this challenging process.
Source: “Alimony, Child Support and Separate Maintenance–Does it Count as Income?,” published at FHA.com.