When you attempt to buy your first house post-divorce, you may discover that your income alone is not enough to qualify for a sufficient mortgage loan. Before you become discouraged, however, know that you may be able to use your alimony payments to boost your total income.
The IRS considers alimony for income tax purposes, so it only makes sense that prospective buyers should be able to include the payments on their home loan applications. According to Rocket Mortgage, alimony is very much a valid form of income. However, if you want to qualify for a higher mortgage based on your monthly alimony payments, your situation must meet a few conditions.
Lenders look for on-time payments
One of the main considerations lenders make in regards to alimony, aside from the monthly amount, is the length and timeliness of payments. Lenders, as a rule of thumb, like to see that the payee has made on-time payments for a period of at least six months. If your ex has a history of late payments or partial payments, a lender is unlikely to consider alimony as part of your income, even if your ex is legally obligated to pay you. Additionally, you must show that your ex-spouse owes you at least three additional years of support.
Other documentation lenders want to see
If your situation meets the eligibility criteria, you will need to gather documentation to prove to lenders you are a low-risk, responsible borrower. Those include the following:
- W-2s: Lenders want to see at least two years’-worth of income statements.
- Copies of Your Debts: Lenders want to see you have enough money, after paying your monthly expenses, to afford a mortgage payment. To determine this, they will need to see your monthly bills, such as credit card payments, utility bills, rent, etc.
- Tax Documents: To verify your income, lenders will want to see at least two years of tax returns. If you are self-employed or work as an independent contractor, you may have to present two years of 1099s and profit and loss statements.
- Documentation of Other Income Sources: If you receive income from any other sources, such as a pension, commissions, overtime payments or survivor’s benefits, bring proof of them so you can count them towards your monthly income.
Of course, you should also bring along support documentation. Those include the court order and bank statements or blank checks to prove your ex-spouse makes timely and consistent payments.