Tip In Qualifying For FHA Loans With Child Support Payments

Tip In Qualifying For FHA Loans With Child Support Payments

This BLOG On FHA Loans With Child Support Payments Was UPDATED On July 2, 2017

• Qualifying for FHA Loans With Child Support Payments can affect the borrowers debt to income ratios.
• On the flip side, FHA Borrowers who are receiving child support payments can use it as qualified income.
• In order to use it as qualified income, child support payments need to continue for the next three years.
• FHA Loans With Child Support Payments is not good if borrowers are delinquent on their court ordered child support payments.
• Debt To Income Ratio is the amount of debt a mortgage loan borrower has compared to the monthly gross income.

Case Scenario On Debt To Income Ratio

• For example, lets take a case scenario where a mortgage loan borrower has total monthly debt payments of $1,000.
• We will say that this borrower has monthly gross income is $4,000.
• Debt to income ratio by lenders is calculated by dividing the monthly debt payment of $1,000 by the monthly gross income of $4,000.
• This 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 lenders calculate debt to income ratios.

Child Support Payments In Debt to Income Ratios

There are a lot of expenses raising children. Clothing, education, health care, extra curricular activities, summer camps, and many other expenses. However, expenses associated with children is not calculated by lenders when calculating DTI.

• Mortgage lenders do not take those expenses into account when calculating debt to income ratios.
• However, child support payments are taken into consideration when calculating debt to income ratios.
• Borrowers with court ordered child support payments need to be current in order to qualify for a home loan.
• Child Support Payments are taken into account as 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 the amount of children.

High Debt To Income Ratios

• Child support payments can be a large percentage of a mortgage loan borrower’s monthly gross income.
• Most mortgage lenders have overlays on debt to income ratio.
• The maximum allowed by HUD 4001. FHA Handbook on debt to income ratio is 46.9% front end DTI and 56.9% back end DTI 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.

High DTI Due To 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.

Qualifying For FHA Loans With Child Support Payments

For those mortgage loan borrowers who have large monthly child support payments, I suggest they seek the consultation or a mortgage lender with no overlays on debt to income ratios.

• Mortgage Brokers has access to dozens of mortgage lenders who have special mortgage loan programs for mortgage loan borrowers with high debt to income ratios.
• FHA Guidelines on debt to income ratio allow max 46.9% front end and 56.9% back end.
• However, most FHA Lenders have overlays on DTI and cap it at 45% to 50% DTI.
• The Gustan Cho Team has no overlays on debt to income ratio and will go as high as 56.9%.
• Borrowers who are receiving child support payments can use it as qualified income.

Mortgage Borrowers have high debt to income ratios and need to qualify for a FHA Loan with no overlays on DTI, please contact us at 1-800-900-8569 or email us at gcho@gustancho.com.

Gustan Cho, NMLS ID 873293