Since these expenses are mandatory, it means that you have a pre-existing obligation. Just like a car payment or other contractual obligation, it’s one that lenders consider. According to research, in 2017, roughly 33 billion dollars in child support was paid for more than 15 million children in the United States. For those who receive these payments, alimony and child support payments can qualify as income, which may be considered on loan applications, such as those for cars and homes. Finally, if you are the payor spouse, your debt to income ratio will be a concern when determining if you are qualified for a mortgage. In calculating your debt to income ratio, spousal support is not considered a liability, but rather, deducted from your income.

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The higher your monthly expense, the lower the mortgage you qualify for. If your debt payments are too high, you may not get approved for the loan you want. A major factor to consider during the divorce process is how to handle the division of the marital residence. The parties may choose to sell the marital home and use their share of the profits as a down payment for their respective new homes. In the alternative, one party may wish to remain living in the marital home and refinance the mortgage in order to remove the other from the mortgage. The content provided within this can i use child support as income for a mortgage website is presented for information purposes only.

• Alimony payments are also included in your debt-to-income ratio but they are treated differently.
• This ensures fairness and prevents lenders from disregarding legitimate income sources.
• Knowing how the specific payments of support will affect your debt to income ratio may spark a creative settlement or offer.
• But lenders are becoming increasingly flexible when it comes to child maintenance and mortgage applications.
• Still, it’s worth talking to a lender ahead of time to ensure that you are collecting the right documentation for your loan application.

But it doesn’t mean your maintenance income won’t be taken into account. More lenders are now able to look at a track record of payments being made as adequate evidence. The first thing to know when it comes to making a child maintenance mortgage application is that different lenders have different lending criteria when it comes to using child maintenance in a mortgage application.

Can you use child support to qualify for a mortgage?

Applying for a mortgage using child maintenance as income can make it more complicated. There are factors that will come into play with lenders, such as how long you’ll receive child maintenance payments for and whether you have a formal agreement in place. Typically, lenders address alimony and child support payments by adding them to your total debt burden. This is important because, just like your credit score and down payment are part of the mortgage approval calculation, so is the amount of debt you carry. Child support and alimony payments, sometimes referred to as maintenance payments, can have a negative impact on a mortgage application.

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• Keep in mind that your mortgage lender will be considering the reliability of supplemental income streams.
• If your spouse is looking for equity from your residence, this equity is allowed to be added to the new mortgage as part of your refinance.
• Most lenders require six months to one year as acceptable verification.
• Our low-interest home loans are some of the best in the states we serve.
• 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.

This is effective because, when you seek a mortgage loan, you are only asking for the difference between the cost of the home and your down payment. For example, if you have a $10,000 down payment for a $200,000 home, your mortgage payment may be over $1,000 a month. However, because they share 100% legal responsibility for paying the mortgage should you fail to do so, this can be a heartbreaking way to damage a relationship, as well as the credit score of someone you love.

Dividing Cryptocurrency in Divorce

Inaccuracies may also lead to allegations of mortgage fraud, a serious legal offense with potential civil and criminal penalties. Such issues could damage the applicant’s creditworthiness and make it more difficult to secure loans in the future, as lenders often report fraudulent activity to credit bureaus and industry databases. Now you may ask, why would a person use income to qualify for a mortgage that is not going to continue for very long? Even 3 years is not a long time if you are depending on using that income to make sure your mortgage is paid.

Let’s talk about how child support and alimony can affect the home loan qualification process. If, for example, a borrower’s child is turning 18 within the next two years and child support ends at that time, the income won’t count, regardless of how regularly it’s been received. Mortgage guidelines require the income to be projected to continue for at least three more years. This information may include links or references to third-party resources or content.

Tim later launched his own loan processing company while originating loans for his own clients, mainly FHA and USDA loans for first-time buyers. When the 2008 housing crash hit, he pivoted to assisting a prominent Loan Officer at Seattle Mortgage and Golf Savings Bank. He eventually became a Mortgage Processing Supervisor at Mortgage Advisory Group. There, he earned a reputation as a solutions-oriented processor, known for solving complex loan scenarios and uncovering obscure guidelines to help clients get approved. While the circumstances that led to the payments are never desirable, one silver lining is that the extra income can help you get approved when buying or refinancing a home. The lender might be able to “gross up” any support income that is not taxable.

John’s experience shows that securing an FHA loan while managing child support payments is achievable with the right support and guidance. If you’re ready to take control of your financial future, set up a free, no-obligation Home Loan Coaching Session with one of our Loan Officers. We’ll help you understand your current eligibility and create a plan for improving your credit score, DTI, or other factors so that you can qualify for the best loan possible. One of the best and most dramatic ways to reduce your interest rate, and qualify for a larger mortgage loan, is to increase your down payment. While the duration and amount of alimony and child support are fixed, most people carry other debts that they can pay down. For example, the average American carries a credit card balance of over $6,200.

Tips for Finding a Home Post Divorce

This document can be a support order, a property settlement agreement, or perhaps a final divorce decree, signed by the parties, outlining the payment amount and the period of time over which payments will occur. Lenders are unlikely to consider either proposed or voluntary support payments as income. You can list both your child support payments and your alimony payments as streams of income when you apply for a mortgage as long as you meet a few conditions.

We can deduce child support continuation based on the dependents’ ages. 1) Child support or alimony support income must be clearly described in the separation agreement and/or support agreement. If there is no documentation regarding support income, then, as a mortgage company, we cannot use it for qualification purposes. FHA lenders will check public records to see if you have unpaid or delinquent child support. If you’re behind on payments, it can hurt your chances of getting approved. If you’re considering FHA loans with child support payments, be sure to get your finances in order.