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.

It’s about more than just numbers on a page; it’s about proving the stability and reliability of your income to ensure a secure financial future. So, whether you’re looking to start anew or find a forever home for your family, knowing how to leverage child support and alimony can make all the difference in your home buying journey. Other things they may ask for is proof of the money actually making it to you. Depending on what the automated underwriting asks for, you may have to provide bank statements, cancelled checks, or tax returns to show regular payments. If your ex is sporadic or late with his or her payments, those documents would show that and you would not be able to use that income.

• And within that, they’ll ask if there is a formal court order in place and how long will the child maintenance be paid for.
• It’s about more than just numbers on a page; it’s about proving the stability and reliability of your income to ensure a secure financial future.
• When the denominator, income, is increased with the inclusion of child support, it enhances the attractiveness of this ratio the applicant’s attractiveness as a candidate for mortgage financing.
• This can be good news because, if your debt-to-income ratio is not ideal, there are steps you can take to improve the success of your mortgage application.
• Wentworth has a permissible purpose under the FCRA to request and review my consumer report in connection with a financial transaction.

Can You Divorce If Your Partner Doesn’t Want To?

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.

When you’re the one paying alimony

While child support can be considered income for mortgage qualification, it is not treated as taxable income under federal law. According to the Internal Revenue Code (IRC), child support payments are neither deductible by the payer nor taxable to the recipient. This distinction affects how lenders calculate an applicant’s debt-to-income (DTI) ratio, a critical factor in mortgage underwriting. For example, if you earn $5,000 in monthly gross income and receive $1,500 in regular monthly child support payments, the lenders uses $6,500 in total monthly income to determine the mortgage you qualify for.

VA Loan Calculator

Providing inaccurate information about child support on a mortgage application can have significant consequences. Lenders rely on accurate details to evaluate borrower risk, and any discrepancies during verification can result in application denial. The Uniform Residential Loan Application requires full disclosure, and failing to comply undermines the lender’s trust, jeopardizing the loan process. Also the automated underwriting will look at how much child support or alimony income is compared to the rest of your income. If you are using almost all alimony or child support for your income, that may not fly.

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.

Understanding child support in mortgage lending

Our experienced family lawyers take the time to fully understand the financial and emotional complexities that can be involved in separating two lives. We offer the patience and resources to effectively guide clients through a divorce, addressing all the challenges they may face in moving forward with their lives. To learn more about how we can help protect your rights and interests in a complex divorce, contact the Pennsylvania divorce attorneys at Vetrano

• Mortgage lenders may require you to bring 2 years of tax returns to verify your income, especially if you’re self-employed or an independent contractor.
• Ideally, people use this strategy in conjunction with paying down their debt for an added boost.
• There is an exception for seasonal employment (for example, construction).
• It can be crucial when securing a mortgage when different types of income are evaluated.
• It’s possible to receive both alimony and child support payments simultaneously if your ex-spouse is a legal parent of your child.

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.

He praised the team’s professionalism and dedication, noting that they were always available to address his concerns, even on weekends. Bryan was committed to providing for his children through monthly child support payments. Eager to purchase a home, he was concerned that these obligations might hinder his mortgage approval. They will break down how your income is made up into what you earn and any child maintenance payments. And within that, they’ll ask if there is a formal court order in place and how long will the child maintenance be paid for.

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.

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.

They may also request a letter from the child support enforcement agency to verify the status of payments and any enforcement actions. Compare loan options and estimate your monthly payments—including taxes and insurance—for FHA, VA, USDA, and conventional loans. In these cases, you may have to wait for a final divorce decree, receive six months of payments, and then apply for the mortgage. First and perhaps most important, the payment terms must be detailed in a legal agreement. You must also show that you have received full, on-time payments for the past six months.