Alimony is income – its purpose is to help you support yourself post-divorce. But like all sources of income, you have to prove you're receiving it if you want lenders to take it into consideration when you apply for a mortgage. You have to prove that it's a regular source of money coming into your household each month and that your ex is legally obligated to pay it. Exact requirements vary among mortgage companies, but some general principles apply.
Alimony Vs. Earned Income
Most lenders will want to know how much of your total income comes from alimony. Other requirements are usually less stringent if you have a reliable source of additional income that doesn't rely on your ex or the stability of his finances. For FHA loans, the dividing line is 30 percent. If your regular income is $4,200 a month and if you receiving alimony of $1,800, the lender will probably relax its requirements somewhat. If you earn $3,600 and collect $2,400 in alimony monthly, you'll have to document more of a payment history.
Unfortunately, you're at your ex's mercy if you want a potential lender to consider your alimony as regular income. Regardless of what percentage your alimony payments contribute to your budget, if your ex is spotty with his payments, lenders may not factor them in. Your alimony-to-earnings ratio usually determines the required length of his good payment history. If your alimony represents 30 percent or less of your income, the FHA requires a reliable six-month track record. At 30 percent or more, you'll have to prove regular payments for a year. If your alimony is $600 a week, and your ex sometimes gives you only $500 because he came up short, it doesn’t count as a stable payment record just because he didn't skip the week entirely.
Alimony isn't always forever – especially if you weren't married for very long. Before a lender will consider it when approving you for a mortgage, you must typically prove that you'll receive the income for at least three years. In most cases, the three-year period begins on the date you close on the property.
Your next challenge is proving your alimony income to the lender's satisfaction. A verbal or casual agreement with your ex won't cut it – you'll need a court order such as a divorce decree. The order should clearly state the amount of the alimony obligation, how long it's payable, and any details that could affect its duration, such as if you remarry or cohabit with someone. You'll also need proof that you've been receiving the payments on a regular basis. For example, lenders will usually accept copies of your bank statements if they show the deposits.
The Flip Side
Alimony doesn't just add to the income of the recipient. If a court has ordered you to pay alimony and you're trying to buy a house, the lender will deduct your payments from your income. It's a legal obligation, so a spotty payment history will hurt you, just as it would hurt your ex if she's trying to use your alimony obligation to help her qualify for a mortgage.
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