If you’re in the market for a mortgage and you are paying alimony, the guidelines just got easier to allow you to get a mortgage. Here’s how the new guideline will benefit you if you’re paying alimony…
Previously, most mortgage companies would take an alimony payment obligation and use this debt against your income. Last year the FHA was the only loan program that allowed the payment of alimony to be removed from your income rather than using the payment as a debt. Put another way, you will be able to borrow more money when your alimony payment comes off your income rather than off your debt. The reason why is because it takes two dollars of income to offset every dollar of debt. So for example that saying you’re paying $500 per month in alimony. It would take $1000 of income to offset that number. If you did not have enough income to offset that number you’re borrowing power could be reduced by upwards of $100,000.
Traditional mortgages such as conventional financing now give the lender a choice to calculate this in the debt to income or simply remove it from income. In every scenario it benefits the borrower for this to come off income. Do not be fooled working a loan officer or bank that tells you otherwise. Different mortgage banks are going to have different opinions about the alimony payment coming off the form as a monthly debt obligation or off income. More aggressive lenders will likely take it off income as more underwriters now know it a choice on which way factor the alimony payment.
This is a game changer because it allows you to qualify for more even though you still have the monthly obligation. The concept here is that your debt to income ratio can now be lowered even while borrowing more. It is perfect approach. The lower your monthly expenses the Morehouse you can purchase. When you come across a banker or broker that gives you the mortgage amount you qualify for make sure they are specifically taking the alimony payment off your monthly income when using a conventional or FHA Loan. It is likely that as Fannie and Freddie allow these changes, Jumbo mortgage will soon follow suit as many Jumbo investors follow Fannie and Freddie’s guidelines.
Hopefully, the information provided in the post will help you more easily secure finance by providing more choices for you to consider when it comes to purchasing a home or refinancing one you already own.
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