The overwhelming majority of home purchasers utilize a residential lender in procuring a loan. In most every single family residential mortgage loan product, a recognized source of income, for qualification purposes, is child support/alimony. Those guidelines have to do with “pattern and duration” of the “income”. Are you about to be a single parent needing to refinance your home after divorce? Many divorce decrees state the a can i use child support as income for a mortgage house must be refinanced within a certain amount of time after the divorce or the residence must be sold. Many single parents can not approve for a mortgage on their own, as they did not buy the home intending on a single income family.
Does Child Support Count Against Your Debt-to-Income Ratio?
Mortgage companies will only count child support income until the age of 18 so if the child is 15 or over, it will not be considered as qualifying income. Child support payments can significantly impact an applicant’s loan qualification. Lenders consider child support a form of income, similar to wages or salaries. This additional income can improve an applicant’s debt-to-income (DTI) ratio, a critical factor in determining the ability to manage monthly payments and repay debts. A lower DTI ratio increases the chances of securing favorable loan terms.
- If you have income but it isn’t reflected on a W2, a bank statement loan could be right for you.
- Child support and spousal support are often present in divorce cases and often relied on by one party to qualify for a subsequent mortgage.
- For example, you have two children, ages 14 and 17, each receiving $500 monthly in child support.
- In short, mortgage payments are typically amortized with a monthly pattern.
- Therefore, please do not send any confidential or sensitive documents or information by email without contacting our firm first.
Child Support as Qualifying Income for a Mortgage
How child support/income is handled in the settlement/court order can make the difference between loan approval and denial. Residential lenders are very sensitive to what is known as “Ability To Repay” (ATR). It is a new term of art utilized by the recently created Consumer Financial Protection Bureau (CFPB). In short, the CFPB has authority over “everything” related to residential lending. While other factors come into play relative to a mortgage loan approval, a steady “predictable” monthly pattern of income is highly desired by lenders.
Equal Housing Lender
For instance, if you have $10,000 monthly income, $2,000 in spousal support, and $2,000 in debt payments, your debt to income ratio is 25%. Your income is $8,000 ($10,000 minus $2,000 in spousal support) and your debt liability is $2,000, which is $25% of your income. So, same scenario, if you have $10,000 monthly income, $2,000 in child support, and $2,000 in debt payments, your debt to income ratio is 40%. Your income is $10,000 and your debt liability is $4,000 ($2,000 in child support and $2,000 in debts), which is $40% of your income.
Frequently Asked Questions About FHA Loans with Child SUpport Payments:
A cosigner is someone, typically a relative or domestic partner, who assumes equal responsibility for paying the mortgage. Since their income, and possibly their credit score, will be considered in the mortgage calculations, their willingness to co-sign significantly increases your financial position. Debt-to-income ratio is calculated by adding up your mandatory monthly expenses, such as car payments, child support, rent, etc. The total of those expenses is then divided by your monthly income, before taxes, to get your DTI.
- If you have more than one job, bring W-2s from all of your jobs from the last 2 years.
- Paying down school and car loans will also have an impact on your financial viability.
- When the 2008 housing crash hit, he pivoted to assisting a prominent Loan Officer at Seattle Mortgage and Golf Savings Bank.
- Lenders will want to see that the situation is sustainable, so that the mortgage will remain affordable when those maintenance payments cease.
Can you use child support to qualify for a mortgage?
She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan. This article does NOT constitute legal advice and is for general information purposes ONLY. Prior to making any decisions, seek legal counsel from a licensed attorney. Remember, transparency and preparation are key to successfully securing a mortgage while managing child support responsibilities. Pursuant to the Fair Credit Reporting Act (FCRA), I hereby provide my written instructions and authorization for J.G.
We do not make any personal investments on behalf of our clients, nor do we sell any financial products. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. During the divorce process, parties should start planning for mortgage financing needs of the party who desires to qualify and will need the child support component to do so. Any missed or irregular payments may be met with scrutiny from the underwriters and they may discount the reliability of this source of income. We recommend that you contact multiple lenders in the table below to understand the mortgage you qualify for based on your income and other factors.
Contact us for more information about using child support to qualify for a mortgage. If you’re using child maintenance as income in a mortgage application, there’s no reason why you can’t consider buying a home through the Help to Buy Equity Loan scheme. This is providing you meet the criteria, such as being a first time buyer. When it comes to getting a mortgage, you’ll still face a varying picture from lenders in terms of how they will take your maintenance income into account. There are strategies to help offset the impact of alimony or child support payments on your mortgage application, helping you qualify for a favorable interest rate, and achieve your dream of homeownership.
Bank statements or deposit records can also serve as proof that you’ve been receiving these payments consistently. It’s not only about the past and present; the future of your income is just as crucial. Lenders typically require evidence that child support or alimony will continue for at least three years after the date of the mortgage application.
The listings that appear on this page are from companies from which this website and the data provider may receive compensation. These listings may not include all companies or all available products. In 2013, after more than a decade in lending, Tim moved into mortgage education—creating trusted content for sites like MyMortgageInsider.com and TheMortgageReports.com. Today, he blends 10+ years of hands-on mortgage experience with another decade in consumer education at Three Creeks Media, where he leads MortgageResearch.com.
Can Overtime Be Used in Mortgage Applications?
One such income type is child support, which is viewed differently by Conventional and FHA loan programs. Ideally, people use this strategy in conjunction with paying down their debt for an added boost. But either way, more income will improve your percentage of debt-to-income.
When it comes to mortgages, we constantly try to grow and improve our process and knowledge. We provide our clients with a variety of flexible solutions, reliable service and a professional approach. We recognize our clients’ needs are as unique and varied as they, therefore we specialize in custom-tailored mortgage solutions. We proudly serve homebuyers, homeowners and investors across Philadelphia, Bucks County, Montgomery County, and throughout Pennsylvania and Florida. Victoria Araj is a Team Leader for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 19+ years with the company.
If you’re counting on child support to help you qualify, make sure you’re proactive about gathering the right paperwork early in the loan process. Navigating the mortgage application process can be challenging on its own, especially when child support enters the equation. If you’re concerned with how child support affects your ability to secure a home loan, we’ll go over insights for both paying and receiving parents to hopefully provide some clarity. 5) If an end date is not clearly indicated for alimony or child support payments, a mortgage company will typically not use the alimony piece of the income.