Alimony & Child Support Guidelines:
In today’s heavily regulated mortgage environment, I am often asked to explain the latest guidelines regarding using Alimony and Child Support as income to qualify for a mortgage loan. To help you in crafting workable solutions for your separating and divorcing clients, I have provided an outline of these guidelines below.
For Conventional & Government Loans: These represent loans currently available up to $625,500*.
The key word here is “stable”
- Conventional Loans: To be considered stable income, full, regular and timely payments must have been received for six months or longer. NOTE: If a borrower who is separated does not have a separation agreement that specifies alimony or child support payments, the lender will not consider any proposed or voluntary payments as income. In other words they must have received the payments for six months from the date of the support agreement.
- Government Loans: When a borrower has been receiving full, regular, and timely payments for alimony, child support, or maintenance for 12 months, the support is considered as stable income. (at the Underwriter’s discretion for periods less than 12 months may be acceptable provided the lender can adequately document the payer’s ability and willingness to make timely payments. Typically less than six months will not be considered as stable income)
In order for the alimony or child support to be considered as acceptable stable income, borrower must show evidence that it will continue for at least three years after the date of the mortgage settlement.
Acceptable verification that alimony or child support will continue to be paid include …
- A photocopy of a divorce decree or separation agreement (if the divorce is not final) that provides for the payment of alimony or child support and states the amount of the award and the period of time over which it will be received.
- Any other type of written legal agreement or court decree that describes the payment terms for the alimony or child support. If state law requires alimony, child support, or maintenance payments the provided document must specify the conditions under which the payments must be made.
- When determining the acceptability of this type of income, consideration will be given to the borrower’s regular receipt of the full payment due (stability) and any limitation on the continuance of the payments, such as the age of the children for whom the support is being paid or the duration over which the alimony is required to be paid.
- If a borrower who is separated does not have a separation agreement that specifies alimony or child support payments, consideration cannot be given to any proposed or voluntary payments as income when qualifying the borrower.
Proof of Receipt:
The borrower must also provide acceptable evidence of his or her receipt of alimony or child support funds. Examples include, but aren’t limited to…
- Deposit slips (if paid by check, recipients should make a copy of the check and deposit the full amount of the check)
- Court records
- Copies of signed federal income tax returns that were filed with the IRS
- Copies of the borrower’s bank statements that show the regular deposit of these funds
Underwriting analysis will take into consideration the regularity and timeliness of the payments, as well as whether the borrower received all or only part of the full amount that was due.*(call me when you have loans above $625,500 as guidelines are case by case at that level).
Should you have any questions on these guidelines or any other mortgage related matters, please do not hesitate to contact me.
Glen Lazovick is a Senior Mortgage Banker with Apex Home Loans Inc, in Rockville Maryland. www.glenlends.com firstname.lastname@example.org