Alimony, spousal support, maintenance, child support, and other payments ordered through divorce proceedings can vary significantly in structure and terms. While the divorce team might craft support orders that satisfy both parties, how the paying spouse executes these payments can impact the receiving spouse's ability to secure mortgage financing.
Common Issues Disqualifying Support Income for Mortgage Financing:
- Meeting the Consistency and Stability Tests
- Direct Payment to the Receiving Spouse
- Reconciling Support Payments with Outstanding Debts and Agreements
Consistency and Stability Tests for Mortgage Financing
To use support income for mortgage qualification, the "6/36 rule" typically applies: six months of receipt and 36 months of continuance after the loan closes. For government loans, this might be reduced to three months of receipt. Issues arise when support is ordered for only three years. By the time six months of payments are documented, there is less than three years of continuance, disqualifying the income.
Additional criteria include documentation and consistent, timely payments. For example, if Spouse A must pay $1,000 monthly to Spouse B by the 5th, partial or late payments will disqualify the income.
For example, support payments from a fluctuating income may cause inconsistency and stability issues. Involving a Certified Divorce Lending Professional (CDLP®) early can prevent these pitfalls.
Direct Payment to the Receiving Spouse
Sometimes, spouses transfer support payments to a joint account, which the receiving spouse then accesses. This method can disqualify the income, as it appears the receiving spouse is paying themselves. Clear, direct payments are crucial.
Reconciling Support Payments with Outstanding Debts and Agreements
Support payments can also be complicated by reconciling with shared expenses. For example, if a spouse must pay $9,500 in support but pays bills directly from this amount, it disrupts the consistency and stability of payments. From a mortgage financing perspective, it's cleaner to pay the full support amount directly and let the receiving spouse handle expenses.
The Role of a Certified Divorce Lending Professional (CDLP®)
Since 2014, Certified Divorce Lending Professionals (CDLP®) have helped divorcing homeowners make informed decisions regarding home equity solutions. Divorce Mortgage Planning is a holistic approach, evaluating mortgage options within the overall financial objectives related to divorce.
Incorporating divorce mortgage planning into the settlement process helps identify solutions, aiding both parties in overcoming counterproductive positions and emotions. A CDLP® can assess possibilities, resources, and answers regarding the marital home, other properties, and mortgage financing opportunities.
Achieving a Successful Divorce Settlement
Effective communication and strategic negotiation lead to successful divorce settlements, ensuring both parties move forward positively. Working as a team and integrating divorce mortgage planning with a CDLP® results in better solutions and outcomes.
About Divorce Mortgage Planning
Divorce Mortgage Planning evaluates mortgage options within the context of overall financial objectives related to divorce. A CDLP® collaborates directly with the divorce team, understanding the intersection of divorce and family law, financial and tax planning, real property, and mortgage financing. The CDLP® helps integrate the selected mortgage into the long and short-term financial and investment goals to minimize taxes, interest expenses, and maximize cash flow.
Early Involvement is Crucial
Involving a Certified Divorce Lending Professional (CDLP®) early in the divorce settlement process helps set the stage for successful mortgage financing in the future.
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