WILL CHILD SUPPORT OR ALIMONY BE COUNTED AS INCOME/DEBT FOR MY MORTGAGE?
Child support and alimony can be considered income for mortgage loan purposes, though it is not required to be disclosed/counted as income and documented if not needed for qualifying. Child Support and Alimony will be considered a debt, though if not required to continue for more than 10 months, it may not affect qualifying.
If you are using this income for qualifying or disclose that you have a child support/separate obligation the lender will require:
a complete copy of the separation agreement (if not included in the court order) or voluntary payment agreement
child support agreement
*Remember, not disclosing a debt is considered mortgage fraud, which is very serious. It can mean fines and jail time for an offender. Mortgage fraud is wrong, don’t do it!
WHY DOES THE LENDER NEED ALL THIS INFORMATION?
Lenders must confirm the actual obligation and how long the income/debt will continue (based on the age of the children and the agreement). The lender is confirming that there are no other debts that should be included in the loan package.
HOW DO I PROVE THE RECEIPT OF CHILD SUPPORT or ALIMONY PAYMENTS?
- Make copies of the checks and subsequent deposits into an account. DEPOSITS should be made separately and match the agreement/court order.
- Show consistent payment transfers from the payer’s account to your account that match the agreement/court order.
- Provide documentation of payments provided through the online child support office.
If consistent payments can’t be documented, your lender will not be able to use the income.
From the FHA lenders handbook:
Alimony, child support, or maintenance income may be considered effective, if
· payments are likely to be received consistently for the first three years of the mortgage
· the borrower provides the required documentation, which includes a copy of the
- final divorce decree
- legal separation agreement,
- court order, or
- voluntary payment agreement, and
· the borrower can provide acceptable evidence that payments have been received during the last 12 months, such as
- cancelled checks
- deposit slips
- tax returns, or
- court records.
Periods less than 12 months may be acceptable, provided the lender can adequately document the payer’s ability and willingness to make timely payments.
Child support may be “grossed-up” [adding an additional 25% to the amount to count as income] under the same provisions as nontaxable income sources.
The Technology Open To Approved Lenders (TOTAL) ScorecardAccept/Approve and Refer recommendations for alimony, child support, and maintenance income require evidence
· of receipt, using deposits on bank statements or cancelled checks for the most recent three months that support the amount used when qualifying, and
· that the claimed income will continue for at least three years.
For the financial details, the underwriter should use the front and pertinent pages of the divorce decree, settlement agreement and/or court order.
WILL CHILD SUPPORT OR ALIMONY BE COUNTED AS INCOME FOR MY MORTGAGE?
If you are considering purchasing a home in Maryland and want to be sure you are mortgage ready, my brother Tony and I will be happy to help! We help to make the mortgage process a pleasure!
If you already own your home, we are happy to provide a no-cost mortgage review to help you to determine if refinancing may be in your best interest. Please contact me at 410-960-2061.