Home Loan rules have change from the past both for Arizona Mortgage Lender’s and for mortgage companies across the country. Using Child Support and/or Alimony to qualify for a new home loan is no exception. It is important to understand what income you can and cannot use when trying to get approved for a new Mortgage.
Rules for Using Child Support or Alimony income for Mortgage Approval
In order to use child support/alimony and/or spousal maintenance we must make sure the income meets the following 2 standards.
1. The borrower must prove that they have received the income for at least 3 months
2. The borrower must prove that they will receive the income for at least 3 more years
Typically we verify both items by collecting copies of the borrowers most recent 3 months bank statements (to show payment deposits) and a copy of the divorce decree or the child support order to show the terms of the support/alimony and/or spousal maintenance. The decree and/or support order needs to be read through thoroughly by your mortgage professional. The terms contained in each court document can be very specific and an error in interpretation can lead to costly issues leading to a loan approval following apart.
Example Using Child Support or Alimony for Home Loan Approval
I recently had a client come to me that needed help from a new Arizona Mortgage Lender. Her existing lender had told her that she was approved and was counting $3,300 per month for spousal support. The very important piece that was missed was that her divorce decree stated the $3,300 per month support was temporary and it was to be reduced down to $1,200 per month one month after her home was set to close.
The loan would have NEVER gotten through underwriting and would have never closed! This mistake ties directly into rule #2 above. There was no way to show a 3 year continuance of the $3,300 support. Therefore it cannot be considered effective income. We did move forward however we did so with the $1,200 per month income as we could prove it would last for at least 3 years.
By Jeremy House