Can Alimony Affect my Ability to Buy a Home?
People fight about two things in divorce: kids and money.
Dividing assets and debts is usually a pretty straightforward process. (You can read about the basics here and here.) So, you usually don’t fight about that a ton.
Child support is also pretty straightforward and unobjectionable. I mean, honestly, who fights against paying to help their kids? (You can read more about how child support is calculated here and here.)
Same goes for child-care costs and sharing insurance and out-of-pocket medical expenses for your kids. They just aren’t that controversial, so people tend not to fight about them much.
And then there’s alimony. This is where it can get contentious. No one likes to pay alimony. Men don’t like to pay it because they feel like they’re paying their ex-wife to be their ex-wife. And, if men don’t like to pay alimony, women like to pay it even less. (Women paying men alimony is pretty rare, by the way.)
The reality is, though, that alimony is a regular part of divorce. What I mean is it’s pretty common that one party pays another party alimony for a while. (For a primer on alimony calculations, read here.)
Alimony and Mortgages
Because alimony is a regular part of divorce, and because people usually buy homes after divorce (you should wait a little while before buying a home), we get asked pretty often if and how alimony affects buying a home.
There are two angles to this question.
First angle is from the point of view of the person paying alimony.
If you pay alimony, you almost always pay it every month for a period of time (e.g., every month for five years). This means you have a monthly debt obligation that must be paid before paying a mortgage. This increases your debt load when you apply for a mortgage, which means you’ll qualify for a lower loan amount or a higher interest rate.
You can still qualify for a mortgage if you pay alimony, but it will be at a decreased amount or higher cost.
Second angle is from the point of view of the person receiving alimony.
If you receive alimony, that monthly amount will be counted as income when you go apply for a mortgage loan. (It’s also considered income for tax purposes.) This means your alimony will help you qualify for a higher loan amount or lower interest rate.
Ultimately, how alimony affects particular mortgage loan amounts and interest rates is dependent on the company you choose to finance your mortgage. Shop around.
