Utilizing Child Support Income

One thing that comes up quite frequently is utilizing income from child support to qualify for a mortgage. Many borrowers are under the false impression that just because they have a divorce decree stating the ex-spouse has to pay child support, that this qualify's the child support to be used in the mortgage approval. Actual receipt of child support payments must still be VERIFIED.

In many instances the custodial parent will be paid in cash which means there is no way to verify the actual payments were received. Depending on the underwriter, sometimes they will accept a bank statement showing deposits in the exact amount indicated in the divorce decree, but that is very rare.

One of my past customers always gave the ex a hand written receipt from a receipt book which has the carbon copy for her records. Lenders will not accept this. Anyone can go out and buy a receipt book and make any entry they wish.

The easiest way to prove they received the child support is with a money order. Another way is a statement from the state if the child support is garnished. Of course you can use cancelled checks from the ex-spouses account. Unfortunately many ex-spouses are not on good terms after the divorce and they are under no obligation to provide the cancelled checks if they so choose. Most underwriters like to see 12 months of proof but will often accept 3-6 months worth. The more the better.

One of the more popular mortgage programs today is the USDA Rural Housing as it is one of the few programs left that does not require a down payment. However, the USDA will accept no less than 12 months verifiable proof of receipt of child support payments to be used in qualifying.

If you are a divorced parent and are being paid in cash, make sure you start receiving payment in a verifiable form as soon as possible.

If you are a Realtor make sure your potential customers are aware of this and start receiving payments that can be verified. If you can obtain as least 3 months of proof you stand a better chance of using it. Child Support can be a huge plus in determining the amount for which a borrower can qualify.