When you are applying for a mortgage, the bank will look at your overall financial picture to consider how much income you currently have and the debts you currently owe. A decision will be made based on whether it appears you would be able to afford the mortgage payments. Whether you receive alimony or pay alimony, those monthly payments will make a difference to your mortgage qualification.
If you are currently making alimony payments to your former spouse, your ability to qualify for a mortgage could be diminished. In some cases, alimony payments are set by the court and may be administered through a wage garnishment. If alimony payments are verifiable and determined to be ongoing, the mortgage company will included them in your ratio of monthly debt payments. If your total monthly debts including alimony payments are equal to more than 30-45 percent of your total monthly income, you may not be able to qualify for a mortgage.
When you are on the receiving end of regular alimony payments, you may be able to use alimony to help qualify for a mortgage. In most cases, a mortgage company will count alimony payments as a source of income. Providing the total monthly income is at least 55 percent more than the total monthly debts, you may be able to qualify for a mortgage.
Length of Payments
Should a bank decide to recognize alimony payments as a qualifying source of income for a mortgage application, the lending institution will most likely require proof of ongoing payments. Typically, to be considered a valid income source for a mortgage, the mortgage applicant must be able to show that alimony payments have been ongoing for at least one year and that they will be continuing for at least three years following the date of the mortgage application.
Proof of Payments
Prior bank statements or canceled checks may be considered acceptable proof of previous ongoing alimony, but most mortgage banks will require a copy of the divorce settlement or court records showing the amount of alimony in addition to the length of time alimony has been ordered. If a verbal agreement was reached between divorcing parties, a bank may request a notarized document or written agreement to be drawn up by an attorney.
There is also an alternative. Instead of receiving alimony payments, a divorce settlement can be structured to provide for the payment of the mortgage as the source of alimony. The former spouse who is responsible for making alimony payments may apply for the mortgage in his name, or the court may simply issue an order for the responsible party to make payments to the mortgage company every month.
- ActiveRain: Mortgage Income Requirements - Alimony and Child Support Income for Qualification
- IRS. "Changes to Deduction for Certain Alimony Payments Effective in 2019." Accessed Oct. 17, 2020.
- United States Congress. "The Tax Cuts and Jobs Act of 2017." Page 36. Accessed Oct. 17, 2020.
- IRS. "Topic No. 452 Alimony and Separate Maintenance." Accessed Oct. 17, 2020.
- IRS. "Publication 504 Divorced or Separated Individuals." Page 13. Accessed Oct. 17, 2020.
- IRS. "Publication 504 Divorced or Separated Individuals." Page 15. Accessed Oct. 17, 2020.
- IRS. "2019 Schedule 1: Additional Income and Adjustments to Income." Accessed Oct. 17, 2020.
- IRS. "Publication 504 Divorced or Separated Individuals." Pages 16-17. Accessed Oct. 17, 2020.
- Commonwealth of Massachusetts. "Learn About the Types of Alimony." Accessed Oct. 17, 2020.
Sara Melone is a mother of three and a graduate of UNH. With prior careers in insurance and finance, photography, as well as certifications in fitness and nutrition, Melone draws directly from past experience and varying interests. She contributes with equal passion to birth journals, investment blogs, and self-help websites.