How Does Court Ordered Child Support Affect USDA Qualifying?
How Does Child Support Impact USDA Loan Qualifying?
USDA guidelines are very specific when there is documented child support involved, but if not properly calculated it can easily put the brakes on buying a home. Today’s video tip will keep you in the know about this part of USDA qualifying.
Per USDA published guidelines for receipt of court ordered child support income:
I. When calculating repayment or loan qualifying income, lenders must obtain documentation to verify and support that:
- Payments are to be received for at least the three years after the date of closing
- Document payments have been received for the past 12 months
- In cases of payment periods of less than 12 months, this may be acceptable if the lender can document the payer’s ability and willingness to make timely payments.
- Child support has to ability to be grossed up when meeting USDA non-taxable income guidelines which can provide additional repayment income and help with qualifying ratios.
II. Now, for Annual Income calculations which determine USDA household income limits:
- Child support payments received must be included with annual income calculations (Remember, this will apply to all household members even those not on the loan)
- They can be excluded if court ordered payments are not received for an extended period of time, and a reasonable effort has been made to collect them through the official agency responsible for enforcement.
On the other hand, for those required to pay child support the following guidelines will apply:
- Court ordered child support obligations must be included in the debt ratio, unless there is a release of liability from the court.
- Child support payments paid by an applicant are not eligible for child care expense deductions (Household Income Calculations – Annual Income)