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How might alimony affect a mortgage application?

Buying a home is a major milestone in many people's lives; one that is both rewarding and stressful. When it comes time to apply for a mortgage, as most of us have to do, surprising things can affect what a person may or may not qualify to receive. One such factor that is often overlooked is how alimony payments can affect a mortgage.

For those who are receiving alimony payments, it is generally possible to count that income towards your qualifying basis as long as some requirements are met. A loan officer will want to see your complete divorce decree to see the entire picture. For alimony to be used as income when qualifying for a home, you will probably need to have been receiving payments for at least six months on a steady basis, and anticipate continuing to receive payments for at least three years. If your former spouse has been irregular with his or her payments, then you may not be able to use that income to qualify for a mortgage.

For those who are making alimony payments, alimony payments can cut into your borrowing power, since they are considered a debt. A lender will have to evaluate your specific situation and the term of your alimony obligation to determine if you can also take on a mortgage. Generally speaking, if all of your monthly debt payments exceed about 40 percent of your total income, then you may have a hard time qualifying for a mortgage.

While no one wants to think about how long-reaching the effects of a divorce may be, it is a process that can affect you for years. If you are concerned about your divorce settlement and how the division of assets may affect your ongoing quality of life, the guidance of experienced legal counsel can help you explore your options while keeping your rights protected.

Source: Quicken Loans, "How Alimony and Prenuptial Agreements Affect Mortgages," Dawn Jamison, accessed Oct. 27, 2016

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