Qualifying for a mortgage when getting a divorce in Texas. Qualified divorce income calculation.
Qualifying for a mortgage when getting a divorce in Texas. Qualified divorce income calculation can be very tricky. Often times in a divorce and mortgage situation there are various types of income to consider: Employment Income; Alimony/Maintenance Income; Unallocated Maintenance Income; Child Support Income; Property Settlement Note Income; and more. Although all sources of income are considered “income” by the recipient, it is important to understand that from a mortgage financing perspective, not all sources of income are considered “Qualifying Income.”
In order to be considered as “Qualifying Income” certain requirements of each income source must be met. For divorcing Texas clients who will need mortgage financing once the divorce is final, involving a mortgage professional in Texas who specializes in Divorce Mortgage Lending during the divorce process rather than post decree can potentially help avoid common pitfalls when “Income” is not considered as “Qualifying Income.” Let’s take a look at some of the most common income issues in divorce situations with regards to Alimony/Maintenance and/or Child Support. Most Texas divorce borrowers do not collect Alimony or maintenance but it can happen.
Alimony/Maintenance, whether unallocated or allocated, along with child support must meet specific requirements to be considered as “Qualifying Income” for mortgage financing purposes by meeting both continuance and stability tests when getting a divorce in Texas. You can read more about Divorce and Your Mortgage here.
Continuance: A key driver of successful homeownership is confidence that all income used in qualifying the borrower will continue to be received by the borrower for the foreseeable future. Must be able to document that income will continue to be paid for at least three years AFTER the date of the mortgage application. Check for limitations on the continuance of the payments, such as the age of the children for whom the support is being paid or the duration over which alimony is required to be paid.
Stability: A review of the payment history is required to determine its suitability as stable qualifying income. To be considered stable income, full, regular, and timely payments must have been received for six months or longer. Income received for less than six months is considered unstable and may not be used to qualify the borrower for the mortgage. In addition, if full or partial payments are made on an inconsistent or sporadic basis, the income is not acceptable for the purpose of qualifying the borrower.
As an example: A Texas borrower receives a monthly income of $6,000 from varying sources. ($2,500 employment income; $1,500 maintenance income; $2,000 child support) Maintenance income is awarded for 3 years and child support is awarded until each of two children turn 18 (currently ages 5 and 7.) Borrower has been receiving both maintenance and child support for 6 months at time of application. The maintenance income is not considered as “qualifying income” because it does not meet the continuance requirement of 3 years. Therefore it must be excluded and can prevent one from qualifying.
There are many components of income considered in mortgage financing. When income from a divorce situation also comes into play, working with a divorce mortgage professional during the divorce process rather than post decree can help attorneys and divorcing clients identify and possibly avoid income qualifying issues for mortgage financing . When the situation also involves income from other sources such as property settlement notes, asset distribution income, etc. there are additional layers of stability and continuity required.
It is always important to work with an experienced Texas mortgage professional who specializes in working with divorcing clients. A Certified Divorce Lending Professional (CDLP) can help answer questions and provide excellent advice. Call me today or complete an online application now.
Richard Woodward, NMLS 217454
Your Local, Direct, 5 Star Rated Mortgage Lender
Office: (214) 945-1066
Service First Mortgage NMLS 166487
6800 Weiskopf Ave #200, McKinney, TX 75070
Licensed by the Texas Department of Savings and Mortgage Lending (SML) Mortgage Banker Registration. Service First Mortgage is an Equal Housing Lender. This is not an offer of credit or commitment to lend. Loans are subject to buyer and property qualification. Rates and fees are subject to change without notice.