USDA Qualifying Income: Can child support income be used to qualify for a USDA loan?
In today’s video, I am going to share with you the details on how child support income can be used as USDA qualifying income.
Now, before we get started, don’t forget to take advantage and download our USDA Blueprint for Success with this link below.
This free guide is designed to walk you through the process step-by-step and is a great tool for both homebuyers and Realtors alike.
When can child support be used as USDA qualifying income?
As a starting point, court ordered debts such as child support can either be considered a liability or a potentially positive source of income that may be used towards USDA loan qualifying.
Child Support, Alimony, and Garnishments:
When child support is owed by a loan applicant, USDA guidelines state:
“Applicants obligated to pay child support, alimony, garnishments, or other court ordered debts must have the payment included in the debt ratio.”
It is important to remember, whether child support is deducted from your pay check or paid directly to an individual, the monthly amount must be included as a debt which will be documented by items such as a child support court order or divorce decree.
Child Support Income for qualifying
However, when received as income, court-ordered child support may be used towards USDA loan qualifying when the applicant has:
- At least a 6-month history of receiving the income;
- The child support receipt has been consistent; and
- It will continue for at least 3 years past the date of loan closing.
Additionally, voluntary child support may also be used for USDA qualifying, income but will be subject to additional requirements.
Key points to remember when attempting to use child support income to qualify for a USDA loan:
- When the minimum history has been met, but the payment amounts are not consistent, the child support must be averaged over the time it has been received;
- Payments received for 6 months or less with zero received for any month must use zero;
- Also, and very importantly, if the child support is tax-exempt, it may be increased by up to 25% for qualifying purposes. This is commonly referred to as “grossing up” nontaxable income which results in your qualifying amount being increased.
For example: if someone receives $500 in child support that is not taxable, after grossing it up, we can use up to $625 towards their USDA loan qualifying.
Whether it be FHA, VA, USDA, or Conventional – Just call or email to discuss your scenario and let us show you the “Metroplex” difference.
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Just 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.