Spousal Support (alimony) payments can be a major complication with most lenders when trying to qualify for a mortgage, and it becomes increasingly difficult with the addition of other monthly liability payments such as credit card or vehicle loans. However, special programs are available to help you get the home you want. The example below explains why you may have had trouble so far, and how I can help you going forward!
A key qualifying factor with most lenders is that a borrower must not exceed a predefined Total Debt Service Ratio; that is, total payments must not exceed a set percentage of their total income. Consider the following lender approaches where:
Allowable Total Debt Service Ratio = 42%
Mortgage = $2,000 monthly x 12 months = $24,000 / yr
Alimony = $1,500 monthly x 12 months = $18,000 / yr
Gross Annual Income = $100,000 / yr
Most lenders treat spousal support payments like any other liability, while a few allow them to be removed from the equation altogether.
MOST LENDERS’ APPROACH
|
(Mortgage Payments + Liabilities incl. Alimony) |
| ($24,000 + $18,000) $100,000 |
| $42,000 $100,000 |
| = 42% A single credit card or vehicle payment will disqualify you 🙁 |
SPECIAL PROGRAM
|
(Mortgage Payment + (Liabilities – Alimony)) |
|
($24,000) |
|
$24,000 |
| = 29.3% This is well within acceptable limit for participating lenders 😀 |
I can help both payer and payee in the spousal support situation obtain financing and will meet at the time and location of client convenience.