How child support & alimony can affect getting a mortgage


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When you apply to purchase or refinance a home, the mortgage lender adds your monthly fixed expenses to your housing payment, creating a debt-to-income ratio. When this figure is expressed as your total monthly expenses (counting that housing payment) divided into your monthly income, it becomes a payment-to-income ratio.

Fannie Mae and Freddie Mac allow this ratio to be up to 50 percent. The Federal Housing Administration sometimes allows it to be as high as 55 percent. 

When you have a monthly debt payment, it takes $2 of income to offset every dollar of debt. For example, if you have a $500 monthly car payment, $1,000 of income is needed to offset that debt. 

When you have an alimony obligation, that debt comes off of income and isn’t counted as a monthly debt. This actually allows you to borrow more when purchasing or refinancing a house. 

Child support, though, is counted as a monthly debt against income from the mortgage payment the same way a car or credit card payment is. 

A $500 monthly payment represents about $100,000 of spending power. That can mean the difference between a $400,000 home and a $500,000 one. This means that your purchasing power can be significantly altered by child support or alimony payments.

You can boost your borrowing potential by paying off debt to qualify for a mortgage (if you have the cash), getting a cosigner or changing your income.

If you’re looking to purchase or refinance a house, talk to a quality lender who can help you navigate your debt picture.

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