The need to utilize alimony/maintenance as qualified income when obtaining mortgage financing is not uncommon in a divorce situation. The key to using alimony/maintenance as qualified income can be tricky and goes beyond the normal time requirements of receipt.
Proof of receipt and continuance are the most prevalent requirements for obtaining mortgage financing. What this means is that in order to use alimony/maintenance as qualified income for mortgage financing the borrower must be able to show proof of receipt for 3-6 months depending upon the type of mortgage financing and proof that the alimony/maintenance will continue for a minimum of 3 years (36 months) once the loan has closed and funded.
There are additional requirements that can come into play when using alimony/maintenance as qualified income for mortgage financing after a divorce.
- Timeliness in Payment. The borrower must be able to show that the payment of alimony/maintenance is paid in a timely manner. This means that the support must be paid and received by the borrower consistently and in accordance with the timeline of the divorce settlement agreement.
If the divorce settlement agreement states that support is to be paid by the 5th of the month and support is sporadically paid at different times during the month; the payment of support may be deemed as inconsistent and not used as qualified income.
2. Amount Received. The borrower must be able to show that the payment of alimony/maintenance received is the same amount as ordered by the divorce settlement agreement.
There are many times where divorcing couples may agree for the monthly ordered support to be paid out of each pay period of the paying spouse rather than 100% of the ordered support at the beginning of the month. If alimony/maintenance is being paid in 2 or more installments during the month, the borrower must be able to show that the amount received consistently equals the amount ordered in the divorce settlement agreement. It is important that the borrower be able to document the consistency of the installment payments or the requirement in 1 above becomes an issue of non-timely payments.
Additionally, if the amount received is consistently lower than the court ordered amount, the total amount of alimony/maintenance needed for qualifying purposes for mortgage financing may be lowered to the lower documented amount.
Timeliness and payment amount are very important requirements needed in order for alimony/maintenance to be considered as qualified income for mortgage financing. The inability to document the consistent receipt of alimony/maintenance may result in the inability to use support income as qualified income for mortgage financing purposes.
If you are in need of mortgage financing and alimony/maintenance is to be used as qualified income, it is important to work with a qualified Certified Divorce Lending Professional (CDLP) to make sure there are no surprises along the way.
It is always important to work with an experienced mortgage professional who specializes in working with divorcing clients. A Certified Divorce Lending Professional (CDLP) can help answer questions and provide excellent advice. To find a CDLP in your area, please click here.
This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Interest rates and fees are estimates provided for informational purposes only, and are subject to market changes. This is not a commitment to lend. Rates change daily - call for current quotations.