Alimony Income Used to Boost Mortgage Approval Chances?
Alimony income can be used to boost mortgage approval chances since it is considered as income for banks.
First let’s take a look at what alimony income would look like. In most states there are five types of post divorce alimony, that is money received following a divorce which one party receives from the other, usually in monthly payments. Lump sum alimony is an exception as it is one large payment following the final judgment and no more payments in the future. Permanent alimony is an adjudicated amount paid monthly for the life of the recipient unless the recipient remarries, has proven supportive cohabitation or either party dies. Durational alimony is awarded for a determined number of years, not to exceed the length of the marriage.Bridge-the-gap alimony may be awarded to assist a party by providing support to allow the party to make a transition from being married to being single. Bridge-the-gap alimony is designed to assist a party with legitimate identifiable short-term needs, and the length of an award may not exceed 2 years. An award of bridge-the-gap alimony terminates upon the death of either party or upon the remarriage of the party receiving alimony. An award of bridge-the-gap alimony shall not be modifiable in amount or duration. Rehabilitative alimony is based on a plan to rehabilitate a person to better job skills through education or career training and continues until the plan is completed. As can be seen, for the purpose of obtaining a mortgage, lump sum and bridge-the-gap alimony cannot be used. Rehabilitative alimony can be used if the payments will continue until the person has completed their education or training to qualify them for employment or a higher paying job. Durational alimony must be for more than three years from the time of the mortgage application while permanent alimony qualifies as it is on-going.
So yes, alimony can be used to boost mortgage approval chances. There are, however, basic criteria guidelines for this approval as used by banks and mortgage companies in considering if alimony monies will be allowed as part of the mortgage loan qualification. The following guidelines and suggestions for adhering to these guidelines are listed below:
- Documentation is of primary importance to the mortgage process. A copy of the written legal document showing details of the alimony received must be provided. It must be a court ordered document, not just an agreed upon amount, as the alimony must come from an “enforced” payment with legal means of obtaining monies should there be arrearages in the future. Amount and frequency of payments and how the payments are to be made must be in the document as well as details such as the affect of remarriage or supportive cohabitation.
- Alimony payments can be required for least three years from the time the mortgage is applied for, however each financial institution has different requirements. With rehabilitative alimony the amount must cover the completion of the education or training to allow the recipient to become employed or increase their pay to a level satisfactory for making loan payments.
- Proof of alimony received must be shown with copies of bank statements and copies of alimony checks showing where the payment came from for a period of at least one year before applying. Receipt of money and deposits must be consistent each month during that year. This will show the likelihood that alimony income will continue as ordered.
On a final note, even if the above criteria are met, there is still the issue of whether the amount of alimony received will qualify toward receiving the desired loan. Alimony alone cannot qualify an individual for a mortgage loan. There must be other verifiable income, usually in the form of earned income. While the actual percentage of income allowed coming from alimony payments varies, 30% or less is what the FHA allows and so is usually the amount most mortgage companies accept. As in this and all the information given above there can be variations, it is wise to seek the counsel of a reputable mortgage broker when thinking about obtaining a mortgage by using your alimony money as part of your loan qualification.
If you have any questions You can call Grant Gisondo’s office at (561) 530-4568 to make an appointment.