If you are divorced or are going through a divorce, you might assume that receiving alimony and/or child support payments will qualify as income to refinance your current mortgage or get a new one.
Unfortunately, you may discover that is not necessarily true.
Requirements for Alimony and/or Child Support to be Considered Qualified Income for a New Mortgage or Refinancing
The alimony and/or child support you are or will be receiving will only qualify as income if:
- It is subject to a Divorce Decree or a Divorce Settlement or Separation Agreement and
- It passes the “6/36 rule.” This rule applies separately to the alimony payments and the child support payments. You must be able to prove you have consistently received each payment separately for at least the previous 6 months and that you will continue to receive each for at least 36 more months (3 years) from the date of the closing.
In order to prove the 6/36 rule, you will have to show that payments were consistently received on time for the previous 6 consecutive months using bank account statements, deposit slips, or some other proof of receipt. You will also be required to provide the Divorce Decree, Divorce Settlement, or Separation Agreement that stipulates the amount and duration of Alimony and/or Child Support, along with evidence of your children’s ages (birth certificates) to show that they will be young enough for you to continue to receive Child Support for at least 3 more years after closing. (The age of emancipation – when child support is no longer required to be paid – is typically 18 or 21 in most states.)
If you are also receiving payments as part of your divorce under a Property Settlement Note (for your share of a business or other property), you must show evidence that you have received the payments consistently and on time for at least the previous 12 months and that you will continue to receive those payments for at least 36 more months from the closing. You could call this the “12/36 rule” for Property Settlement Note payments.
How We Can Help You
These are just some of the many unique aspects of refinancing your current mortgage or getting a new mortgage if you are divorcing or divorced.
Unfortunately, many divorce attorneys, loan officers, and mortgage brokers are not familiar with all the nuances of mortgage financing in the context of divorce. (There are many others and we will write about them in future articles.)
Ideally, you want to structure your Divorce Settlement Agreement in the best way possible so you will not have any obstacles when trying to refinance your current mortgage or get a new one.
Therefore, it is very important that you work with a divorce mortgage expert during the divorce process and not after your divorce is finalized when it will be very difficult, if not impossible, to make any changes. Please contact us for more information.