Using Alimony, Child Support, or Separate Maintenance to Qualify for a Mortgage
If you’ve been through a divorce or separation recently, you might wonder whether you can use various types of support payments to qualify for a home loan.
The answer is yes. Here’s what you need to know.
Alimony, Child Support, and Separate Maintenance Mortgage Requirements
If you receive alimony (spousal maintenance), child support, or separate maintenance, it may help you qualify for a mortgage.
Lenders can consider these payments as steady income under the right circumstances.
First and perhaps most important, the payment terms need to be detailed in a legal agreement. You must also show that you have received full, on-time, payments for the past six months.
This can be where things often fall apart when using support payments for a mortgage. Lenders need to prove the income is steady and reliable. The only way to make a case for future reliability is to look at the past.
The unfortunate fact is that your former spouse can derail your homebuying hopes by sending irregular or partial payments. Sadly, non-payment of support is too common for lenders to take a legal document at face value.
Here’s a summary of the documentation needed to use support payments to qualify.
Divorce decree, separation agreement, or other legal document detailing the support amount and how long it will be received
The portion of state law that requires alimony, child support, or separate maintenance and conditions under which it must be paid
All supported children’s ages (typically found in the divorce decree) to ensure payments will continue for three years
Proof of full, regular payments for six months
With the right documents, you can add monthly support to your qualifying income to help you get approved.
What if the Divorce Isn’t Final?
It could be difficult to get a mortgage before a divorce is final. Temporary support amounts could change. Also, you may not have six months of alimony or child support receipt.
In these cases, you may have to wait for a final divorce decree, receive six months of payments, then apply for the mortgage.
Still, it’s worth talking to a lender ahead of time to make sure you are collecting the right documentation leading up to your loan application.
Recent Divorce or Separation
It could be difficult to use support or maintenance payments to qualify for a mortgage with a recent divorce or separation.
As mentioned, you need to document six months of full, on-time payments. Waiting until your sixth payment to apply could be the best way to increase chances of approval.
Child Support for Older Children
Child support that ends within three years of the loan application can’t be used to qualify.
The lender will review each child’s age. If they turn 18 within three years, child support can’t be used.
For example, you have two children, age 14 and 17, each receiving $500 per month in child support. All payments were full and on-time.
Your qualifying amount is $500 per month since one child’s support will end in one year when they turn 18.
“Grossing Up” Non-Taxable Support Income
The lender might be able to “gross up” any support income that is not taxable. This is when the lender can use 15-25% more than the face value of the support to account for it not being taxed.
This can give you that extra boost you may need to qualify for more home.
Read our article on grossing up income and how it can help you qualify.
Receiving Party Does Not Have To Disclose Support Payments; Paying Party Does
Keep in mind that you never have to disclose receipt of income from a divorce or separation. The lender never has to know about it unless you want them to.
However, the paying party does have to disclose payments when applying for a mortgage. The legally required payment will be treated like a debt and added to debt-to-income ratios. In this way, support obligations can make it significantly harder to qualify if you owe child support, alimony, or other types of maintenance.
See if Support Payments Can Help You Qualify
If you’ve struggled to qualify for a home loan in the past, and didn’t use support income to qualify, it’s worth applying again.
While the circumstances that led to the payments are never desirable, one silver lining is that the extra income can help you get approved when buying or refinancing a home.
Tim Lucas spent 11 years in the mortgage industry and now leverages that real-world knowledge to give consumers reliable, actionable advice. Tim has been featured in national publications such as Time, U.S. News, MSN, The Mortgage Reports, My Mortgage Insider, and more.