One of the most important criteria used in qualifying for a mortgage loan is debt to income ratios.
Debt to Income Ratios are the amount of debt a mortgage loan borrower has compared to the monthly gross income. For example, if the mortgage loan borrower has total monthly debt payments of $1,000 and their total monthly gross income is $4,000, to calculate debt to income ratio is done by dividing the monthly debt payment of $1,000 by the monthly gross income of $4,000, which yields a 25% debt to income ratio. The proposed new housing payment is also calculated as monthly debt. Mortgage loan borrowers need to realize that child support payments will be calculated as monthly debt when a mortgage lender calculates the debt to income ratio.
Child Support Payments are counted in Debt to Income Ratios
If you have children, there are many expenses that parents have in their monthly budgets that is allocated towards them. Mortgage lenders do not take those expenses into account when calculating debt to income ratios. However, if you and your spouse are divorced and you have been ordered by the court that you need to provide child support payments, those payments are taken into account as your monthly debt obligations in calculating debt to income ratios. Many mortgage loan borrowers do not realize this and a large percentage of mortgage loan borrowers get disqualified for a mortgage loan approval due to child support payments. Child support payments are not cheap depending on how many children you have.
High Debt to Income Ratios
I have seen child support payments that are as high as 40% of the mortgage loan borrower’s monthly gross income. Most mortgage lenders have a cap on a 40% debt to income ratio when qualifying for a mortgage loan. Child support payments can definitely be a hurdle for a mortgage loan borrower in qualifying for a mortgage loan.
Solutions for Obtaining a Mortgage Loan if You Pay Child Support
There are some solutions for mortgage loan borrowers who have high monthly child support payments. One option is to get a non occupied cosigner on the mortgage. Many parents who have high child support payments have a family member to cosign for them in order to qualify for a mortgage loan. Asking someone to cosign for them is a major big favor to ask but I have seen a lot of parents of the mortgage loan borrower cosign for them. Other options include getting a part time job. However, a mortgage lender will only take a 2 year history of part time employment in order for the part time income to be used in qualifying for the mortgage loan.
Child Support Payments can Affect Debt to Income Ratios
For those mortgage loan borrowers who have large monthly child support payments, I suggest they seek the consultation of a mortgage broker. A mortgage broker has access to dozens of mortgage lenders who have special mortgage loan programs for mortgage loan borrowers with high debt to income ratios. I can help mortgage loan borrowers who have debt to income ratios as high as 56.9%.
If you have high debt to income ratios and need a mortgage loan, please contact me at 262-716-8151 or email me at email@example.com or visit us at www.gustancho.com .