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How Alimony and Child Support Payments Affect Mortgage

How do alimony or child support payments affect your ability to qualify for a mortgage?

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

If you are required to pay alimony, child support or similar payments -- also known as maintenance payments -- according to a court order or legal document such as a divorce or separation agreement, this monthly expense affects the mortgage you qualify for.

For child support and maintenance payments, the expense is included as debt in your debt-to-income ratio when you apply for a mortgage. In short the payments are treated like any other debt such as a credit card or car, student or personal loan.

The higher your monthly expense, the lower the mortgage you qualify for. If your debt payments are too high, you may not get approved for the loan you want.

For example, if you pay $1,000 in monthly child support that means you can spend $1,000 less on your monthly mortgage payment, which reduces the loan you can afford. This is why counting child support and maintenance payments as debt can significantly limit the mortgage you are eligible for.

Alimony payments are also included in your debt-to-income ratio but they are treated differently. Lenders have the option to either subtract the alimony payment from your monthly gross income or include the payment as debt to calculate your debt-to-income ratio.

Use ourMORTGAGE QUALIFICATION CALCULATORto determine the mortgage you can afford including child support or alimony payments

The lender has discretion to choose the option that is most beneficial for the applicant, which in most cases means applying the method that enables you to afford a higher loan amount. As illustrated by the example below, subtracting the alimony expense from your income usually enables you to qualify for a much higher mortgage amount as compared to adding the alimony payment to your monthly debt expense.

Example: How Alimony Payment Affect the Mortgage You Qualify For

Assumptions

30 Year Fixed Rate Mortgage

Mortgage Rate: 3.500% 

Monthly Gross Income: $5,000

Monthly Debt Expense: $1,000

Monthly Alimony Payment: $800

Method 1: Alimony Subtracted from Gross Income

Monthly Gross Income: $5,000

(-) Monthly Alimony Payment: $800

(=) Income Less Alimony: $4,200

Monthly Debt Expense: $1,000

Mortgage Amount: $194,000

Alimony Added to Monthly Debt Expense

Monthly Gross Income: $5,000

Monthly Debt Expense: $1,000

(+) Monthly Alimony Payment: $800

(=) Monthly Debt Plus Alimony: $1,800

Mortgage Amount: $124,000

This example demonstrates why it is important to work with your lender to apply the debt-to-income calculation method that works best for you if you make alimony payments. We should also reiterate that the option to subtract a payment from your income or include it in your debt only applies to alimony and not child support or other payments.

The table below show mortgage terms for leading lenders in your area.  We recommend that you contact multiple lenders to confirm the loan you qualify for.  Shopping lenders is also the best way to save money on your mortgage.

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Current Mortgage Rates in San Diego1, California1 as of October 1, 2020
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Data provided by Brown Bag Marketing, Inc. Payments do not include amounts for taxes and insurance premiums. Read through our lender table disclaimer for more on rates and product details.

Another common question is if it is possible to exclude child support or alimony payments when you apply for a mortgage? The only circumstances under which child support or alimony can be excluded from your mortgage application are if the payments are voluntary or if you have less than eleven months of payments remaining.

The final point to highlight is that you are required to provide a copy of your divorce or separation agreement or other legal document that specifies the terms of your child support or alimony when you apply for the loan. The lender uses this information to confirm your monthly obligation and to determine how the payment should be factored in to your application.

Sources

"B3-6-05, Alimony/Child Support/Separate Maintenance Payments."  Selling Guide: Fannie Mae Single Family.  Fannie Mae, February 5 2020.  Web.

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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

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