This is a common question among single parents applying for a mortgage. Many simply do not know how to account for money they receive as child support. How does the lender take this part of your finances? How does this impact your mortgage application, in general?
Lenders can take alimony as income
Yes, you can include money you receive as child support for income, with the proper documentation. You must be able to show to the lender that you are receiving such payments regularly. Informal payment arrangements hardly pass it for lenders.
Our lenders can answer your questions about FHA loans here.
Rules on amount
The FHA has established some rules regarding recognizing child support payments as income. But these rules are dependent on the ratio of the alimony payments against your other income sources.
If the alimony is determined to be 30 percent or less of your household income, the following rules apply:
- you must be able to establish that the party paying the alimony is indeed obliged to do so
- the payments must have been going on for at least 6 months before the loan application
- the payments must continue within the next three years
- you must be able to show evidence of regular receipt of such payments for the past 6 months
If, however, the alimony exceeded 30 percent of the household income, the lenders would require that:
- the borrower has been receiving alimony for a full year before the loan application
- the payments must continue within the next three years
- you must be able to show evidence of regular receipt of such payments for the last 12 months
Legal paperwork is the key for the processing of many mortgage requirements. In the case of recognizing alimony, the same rule applies. Secure a document that clearly establishes the alimony amount received and for how long it is to be received. This helps the lenders and the insuring agency (FHA) determine your risk as a borrower.
Rules may vary from lender to lender, although the above stated are the most common standards. When you inquire, ask for the lending company’s rules on alimony to be properly guided before you forward your application.