Advice for disabled recently divorced person

[Lana Nelson]

Hello!

My mom recently got divorced (August 2023) and is looking at a 260k for her share of retirement account, debts of about $50k ($30k owed to parents who helped with legal fees, $6500 owed to sister who also helped with legal fees, and $8k owed on life insurance that ex husband had take out and left to her) and an alimony of $5600/month. 

She is currently in the Santa Clarita, CA area living with Lupus. This means her health insurance alone will cost about $1k/month from the quotes she has received. She is unable to work but has been receiving consistent payment from ex for 3 years. 

We are wondering what the best avenue would be in regards to real estate? We would do an FHA loan but her monthly income doesn't cover the expenses of the place. A $550k house with 3.5% down would leave a higher monthly mortgage that she can not afford. Even with a 20% down payment we are finding the monthly expenses added up to be too expensive.

There is also the factor of the cash withdrawal via a QDRO if we go that route. Whatever we take out will be taxed as income for both federal and state (there is no 10% penalty fee). if we pull the full amount to pay debts and for downpayment on house, that pushes her into a high tax bracket where she would pay well over $80k on taxes.

Thank you, 

YiLan Nelson