Mortgage Refinancing Where An Ex-Spouse Is Receiving Child Support and/or Alimony and Spousal Support as Part or All of Their “Income”

Florida Husband and Wife have a young Child together.

Husband and Wife split up.

Wife wishes to remain in the marital home with Child. Husband, however, wants to sell the marital home and receive his one-half of the equity in it. Right now.

The compromise that both of them are equally agreeable to is for Wife to refinance the marital home in her own name alone and to use the refinanced loan proceeds to buy out Husband’s interest in the marital home.

Wife checks with their bank though and it turns out that Wife doesn’t earn enough money herself either to cover their current mortgage, property taxes and insurance on the marital home, or to qualify for a new mortgage in just her own name.

Husband and Wife both fear their amicable divorce is slipping away from them.

But, under all of the circumstances in Husband’s and Wife’s particular case, their desired arrangement can be salvaged.

Since Child is young, Wife is entitled to receive child support for nearly ten years. And Husband has been consistently paying Wife monthly child support since Husband and Wife separated six months earlier.

Husband made it clear to Wife from the outset that he was prepared to fight to collect on his interest in the marital home as soon as possible. He wanted a lump sum.

But he wasn’t unwilling to make reasonable monthly alimony and spousal support payments to help Wife out with her living expenses, so that Wife can afford to keep her work schedule within previously agreed limits until Child goes off to college.

And Husband is agreeable to putting that into a court order right away.

Although it isn’t salary, alimony and spousal support, and child support are both generally viewed by loan underwriters similarly … under certain conditions anyway.

In assessing creditworthiness of former spouses relying on child support and/or alimony and spousal support as part or all of their income, loan underwriters generally look most favorably on:

  • legally binding obligations

  • of substantial duration (at least three years)

  • set forth in a court order or, at a minimum, a legally enforceable settlement agreement

    1. wage garnishment or income deduction orders

  • a stable track record of support payments (at least six months to a year)

Remember that the above are merely typical loan underwriting criteria. Each lender may unilaterally establish its own loan underwriting criteria.

Read more in this FHA Loan Article: Alimony, Child Support and Separate Maintenance–Does it Count as Income? and this Consumer Financial Protection Bureau response: If I want to rely on the alimony or child support that I receive in my mortgage or home equity loan application, does a lender or broker have to consider that income?