How can child support income help you qualify for a USDA loan?
In today’s video, I will explain how child support income can be used to qualify for a USDA loan and also discuss the most recent updates for the required documentation.
Now, before we get started, don’t forget to take advantage and download our USDA Blueprint for Success. This free guide is designed to help walk you through the USDA qualifying process step-by-step and is a great tool for both homebuyers and Realtors alike!
Qualifying for a USDA loan
In order to use child support income to qualify for a USDA loan, we will first need to review whether it is court-ordered or paid through a voluntary payment agreement.
Court Ordered Child Support
USDA guidelines require the following when there is court-ordered child support payments used for qualifying income:
- The payment has been received consistently for at least the past six months; and
- Proof that the child support income will continue for a minimum of three years into the mortgage.
Further, this will then need to be documented either through the divorce decree, legal separation, or court order.
Voluntary Payment Agreements
However, in order to use child support income received through a voluntary payment agreement towards USDA qualifying, the following is required:
- The payment has been received consistently for at least the past year; and
- Proof that the child support income will continue a minimum of three years into the mortgage.
Additionally, evidence of timely and consistent receipt of the payment history would need to be documented through bank statements, canceled checks, deposit slips, tax returns, etc.
USDA guidelines also state the following for child support that has been inconsistently received:
“Child support that meets the minimum history, but the payment amounts are not consistent, must average the amounts received over the time of receipt. Payments received for 6 months or less with zero received for any month must use zero.”
Also, for child support that is not taxable, USDA guidelines state:
“If the income is tax-exempt, it may be grossed up 25 percent” which refers to the ability to increase the gross amount of income received due to the type of income being tax-exempt.
For example, if someone receives $500 in child support, you could “gross-up” that income by 25% and use $625 for USDA qualifying purposes.
In summary, guidelines have become more flexible over the years for those using child support income to qualify for a USDA loan.
Whether it be FHA, VA, USDA, or Conventional – Just call or email to discuss your scenario and let us show you the “Metroplex” difference.
800-806-9836 Ext. 280
Simply call or email if you have any qualifying questions, want to discuss a new scenario, or would just like to take advantage of our free 2nd opinion service which is great for those existing transactions.
I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!
P.S. – You can download our USDA Blueprint for Success by CLICKING HERE.