This Article Is About FHA Loans With Child Support Payments Mortgage Guidelines
Qualifying for FHA Loans With Child Support Payments can affect the borrower’s debt to income ratios:
- On the flip side, 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 as compared to the monthly gross income
In this article, we will discuss and cover FHA Loans With Child Support Payments Mortgage Guidelines.
Case Scenario On Debt To Income Ratio
For example, let’s take a case scenario where a borrower has total monthly debt payments of $1,000:
- We will say that this borrower has a monthly gross income is $4,000
- The 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 in raising children. Clothing, education, health care, extracurricular activities, summer camps, and many other expenses. However, expenses associated with children are not calculated by lenders when calculating DTI.
- 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 borrowers do not realize this and a large percentage of mortgage loan borrowers get disqualified for mortgage approval due to child support payments
Child support payments are not cheap depending on the number of children.
How Child Support Affect High Debt To Income Ratio Borrowers
Child support payments can be a large percentage of the 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.
Solutions 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 borrowers who have large monthly child support payments, I suggest they seek the consultation or a lender with no overlays on debt to income ratios.
- Mortgage Brokers has access to dozens of lenders who have special mortgage loan programs for 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
- Gustan Cho Associates 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 an FHA Loan with no overlays on DTI, please contact us at 262-716-8151 or text us for a faster response. Or email us at firstname.lastname@example.org.