Personal finances are tricky, especially when it comes to divorce-related situations. Divorce has a way of putting an unexpected twist on your future financial moves. Purchasing a home is no exception.
If you pay alimony to a former spouse, you might be afraid that your debt-to-income ratio will be an issue at the mortgage desk. Fear not! The experienced loan officers at MortgageDepot are here to give you the scoop on alimony, DTI ratios and your future as a homeowner.
The Relationship Between Alimony Payments and DTI
If you make alimony payments, there are two potential scenarios that you’ll encounter when shopping for a mortgage:
- Scenario #1: The alimony payments that you make are recorded as debt when calculating your DTI or
- Scenario #2: Those alimony payments are subtracted from your qualifying income and aren’t considered debt.
Is there a difference between scenario #1 and scenario #2? There might be. Remember that a DTI of less than 50% is the magic number to score a mortgage with the best terms. You might have a more favorable DTI if you can use a particular scenario. Can you guess which one?
Calculating Alimony as Debt vs. Negative Income
Did you figure out which scenario above could work out in your favor? If you guessed scenario #2, you’re correct! If your DTI falls a little above 50% when you calculate your alimony payments as debt, you might be able to bump your DTI into a more lender-friendly range if you deduct those payments from your income.
Not every mortgage broker pulls this off, but MortgageDepot isn’t every mortgage broker! We are a group of savvy loan professionals that will clear a path to a mortgage product that works with your finances instead of against them.
At MortgageDepot, we will allow you to deduct your alimony payments from your qualifying income to achieve a lower DTI and get into the home you want.
Contact Us Today!
If you need help navigating the details of securing a mortgage with alimony responsibilities, contact us for expert guidance!
Contact one of our loan consultants to learn more.