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We study the effect of homodyne detector visibility on the measurement of quadrature squeezing for a spatially multi-mode source of two-mode squeezed light. Sources like optical parametric oscillators (OPO) typically produce squeezing in a single spatial mode because the nonlinear medium is within a mode-selective optical cavity. For such a source, imperfect interference visibility in the homodyne detector couples in additional vacuum noise, which can be accounted for by introducing an equivalent loss term. In a free-space multi-spatial-mode system imperfect homodyne detector visibility can couple in uncorrelated squeezed modes, and hence can cause faster degradation of the measured squeezing. We show experimentally the dependence of the measured squeezing level on the visibility of homodyne detectors used to probe two-mode squeezed states produced by a free space four-wave mixing process in⁸⁵Rb vapor, and also demonstrate that a simple theoretical model agrees closely with the experimental data.